China’s mutual fund sales have continued to boom this year, with asset management firms selling a record amount of new products in the first half.
The onshore money managers sold 1.6 trillion yuan (US$248 billion) of newly launched funds, an all-time high for the six-month period, according to the Securities Times, a publication run by the People’s Daily. That followed unprecedented annual sales that topped 3 trillion yuan last year.
The result came as a surprise. The euphoria for mutual funds shows no signs of abating in spite of the dreary performance of stocks in 2021.
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The momentum in Chinese domestic stocks has weakened this year amid headwinds that include the prospect of policy tightening and the concern that growth will peak after a resilient recovery from the pandemic.
The strong sales underscore a victory on the part of the Chinese regulator in achieving its goals of increasing institutional participation in the world’s second-largest stock market and restraining volatile swings stemming from retail investor sentiment.
Individual investors account for roughly 70 per cent of stock transactions and have amplified several boom-to-bust cycles in the past decade by chasing the momentum and offloading their shares amid sell-offs.
The Shanghai Composite Index has notched up a gain of 1.8 per cent this year after a 14 per cent surge in 2020 fuelled by a record amount of liquidity unleashed by the central bank, and China’s successful control of the spread of Covid-19.
Stocks could be rangebound in the second half as a result of the lack of catalysts, according to UBS Group.
“We think systemic risk to the stock market is low, with the economic recovery likely to continue, and no sharp turnaround in policy expected,” said Meng Lei, a strategist at the Swiss bank. “However, some potential risks still deserve investor attention,” such as slowing credit growth, rising bond yields and the possible unwinding of leveraged bets.
The cautious outlook will test sales of new funds in the second half, when 954 products are set to accept public subscriptions based on the data from the Securities Times. Out of those, almost half are stock-focused funds and 19 per cent are bond funds, with the rest being index-based funds and ones investing in overseas stocks, the data showed.
Some of the best-performing funds in 2020 have slipped to the bottom of the rankings this year, such as the one managed by Zhang Kun from E Fund Management. They placed bets on technology and educations stocks, the two sectors that are the primary targets of the government crackdown this year.
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