An increase in the number of pension target funds on China’s mutual funds market is expected to bring greater stability to shares.
China recently gave its approval to a third batch of pension target funds, green lighting 14 mutual funds intended to pursue stable returns on retirement savings via mature asset allocation strategies.
The move brings the number of such funds on the mutual funds market to 40 in total, after 12 were approved in the second batch.
Beijing hopes that the launch of pension target funds can help to relieve pressure on a retirement system primarily based upon state and corporate pension plans.
Shang Zhenyu (尚震宇), chief research officer at China Post Securities (中邮证券), said to Securities Daily that the latest batch of approvals arrive just as price-to-earnings ratios for Chinese A shares languish at a historic lows, making this an excellent time for institutional investors, and in particular pension funds.
“Given the trend of the ageing of the population… the launch of pension target funds will further stabilise market expectations ad be of benefit to achieving stable returns over the medium and long-term,” said Shang.
“Pension target funds focus on medium and long-term value investment in terms of investment mentality, and at present market valuations are at historic lows, which is an excellent long and medium-term window for pension fund projects,” said Liu Zhe (刘哲) from the WANB Institute (万博新经济研究院).
“Liquidity expectations of a large scale increase in funds can to a significant extent raise the medium and long-term confidence of investors, and stabilise short-term market sentiment.”