China’s Tianhong sees net profit grow 32.76 times

11 August 2014   Category: News, Asia, China, Global   By Hui Ching-hoo

Chinese asset management juggernaut Tianhong has become the fastest growing fund manager in the country thanks to its online platform Yu’e Bao.  

The Beijing-based fund manager secured a staggering 25.8 times growth in operating revenue to 1.59 billion RMB (US$254 million) for the first half of this year.

According to a financial statement from Tianhong’s major shareholder, Inner Mongolia Junzheng Energy & Chemical Industry, net profit grew by 32.76 times year-on-year to 279 million RMB as of the end of June, from 8.52 million RMB a year earlier.

The blistering growth was mainly attributed to the firm’s partnership with ecommerce giant Alibaba Group, with which it launched its first online money market fund, the Tianhong Zenglibao Monetary Fund, through Yu’e Bao in June 2013.

That led Tianhong to usurp China Asset Management Corp (China AMC) as the largest Mainland asset manager, with total AUM of around 587 billion RMB.

Felix Ng, a senior analyst with Cerulli Associates, told Asia Asset Management that ecommerce platforms like Yu'e Bao have attracted strong interest from younger, first-time investors. With ceilings on the interest rate banks are able to offer for RMB deposits, many Chinese view money market funds as a risk-free, deposit substitute that can provide them with higher yields.

Mr. Ng said he expected the trend to be sustained in the near term, despite the gradual drop in yield of money market funds. It is unlikely that there will be major outflows from platforms like Yu'e Bao as people stay with such platforms for the ability to make online payment for purchases, while investment is only a secondary objective