China bond funds restrict inflows as investors pile in to take shelter
SHANGHAI, Sept 24 (Reuters) - A growing number of bond funds in China have suspended taking subscriptions or capped inflows, amid signs money is gushing into fixed income products as stocks wobble and banks cut deposit rates.
On Friday alone, more than a dozen bond funds announced measures to restrict new purchases, according to fund managers' filings. Around 40 short-term bond funds made similar statements in the past 20 trading days, according to Chinese newspaper China Fund.
Xia Haojie, bond analyst at Guosen Futures, said bond funds looked increasingly attractive for investors at a time when banks are lowering their deposit rates.
China's top five state lenders cut individual deposit rates last week, a move that could help bring down lending rates further to aid the economy. The rate cuts came on top of reductions in certain deposit rates in April.
A bond fund manager, who declined to be named, also attributed the flight to bonds to a bearish stock market, and a tendency to seek shelter ahead of the week-long Chinese National Day holiday that starts Oct 1.
China's blue-chip index CSI300 .CSI300 has tumbled more than 20% so far this year amid gloomy economic prospects.
China Asset Management Co said in a statement about a bond product on Friday that it would reject individual subscriptions exceeding 1 million yuan ($140,300) a day to protect the interest of existing fund holders and strengthen stability of operations.
Huatai-PineBridge Fund Management Co said in a separate product statement that it would suspend accepting fresh subscriptions.
Chinese bond funds have already seen their assets under management (AUM) jump 18% during the first seven months of the year, to 4.8 trillion yuan, the latest data shows.
In contrast, AUM of equity funds and balanced funds, which invest in both stocks and bonds, dropped 7% and 14% respectively during the same period.
China may need to cut banks' required reserve ratio (RRR) in the fourth quarter to keep liquidity ample, the official China Securities Journal reported on Saturday, citing economists. Easier monetary conditions could push bond prices higher.
Chinese investors are also boosting investment in offshore debt under the Bond Connect scheme as U.S. interest rates and the dollar rise sharply. ($1 = 7.1266 Chinese yuan renminbi)
Reporting by Samuel Shen, Jason Xue and Brenda Goh; editing by Clelia Oziel
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.