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February 2024
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China mutual fund inflows soar as investors pile into bonds

mutual funds
By Hui Ching-hoo   
August 11, 2023

Net inflows into China’s mutual fund market surged 321% to 1.22 trillion RMB (US$169.2 billion) in the second quarter from 291 billion RMB in the first three months of the year, driven by bond funds, according to Shanghai-based investment consulting firm IIC Analytics.

It was the second consecutive gain after a 748 billion RMB outflow in the fourth quarter of last year, and boosted mutual fund assets to 27.5 trillion RMB as of June. That was up from 25.9 trillion RMB in March and 25.2 trillion RMB in December 2022.

“Investors have become defensive and shifted their investments to less risky bond funds and money market funds,” IIC Analytics says in a report on August 9.

Bond funds attracted the largest net inflow of 647 billion RMB in the second quarter, followed by money market funds with 475 billion RMB, and passive equity funds, 212 billion RMB.

“The slower than forecast economic recovery and a lack of strong fiscal stimulus may be leaving investors seeking alternatives,” the report says. “Riskier products like active equity have seen a decline, possibly signaling the beginning of a protracted period for flows.”

China’s economy had been expected to grow strongly after Beijing ended its zero-Covid policy. But most data thus far have been disappointing, including a 6.3% year-on-year growth in the second quarter that was a full percentage point less than market expectations, and concerns are mounting about the world’s second largest economy.

Beijing-based China Asset Management Corporation was in top spot, with its funds attracting around 72 billion RMB of net inflows in the second quarter, followed by Shanghai-based Maxwealth Fund Management with 57 billion RMB.

Beijing-headquartered CCB Principal Asset Management was the worst performer with investors pulling out a net 17 billion RMB from its funds.