Stock Market Rallies Boost Fund Redemptions

飞雪寒冰

Huge rallies in China's stock markets this year have boosted the ranks of new managed funds as well as redemptions of existing funds, industry statistics show.

The benchmark Shanghai Composite Index closed July 20 at 3,266.92 points, up 79.42 percent so far this year, while the Shenzhen Component Index rose 106.32 percent to 13,381.22 points.

In the second quarter, a net 113.4 billion units of managed funds were redeemed, or 5.34 percent of all outstanding units, following a 10.77 percent redemption rate in the first quarter, according to Wind Info, a financial data and software provider.

So far this year, 57 new managed funds have been established, issuing 176.1 billion units, almost equivalent to last year's total, Wind said.

Ren Li, vice general manager of asset management at Orient Securities, said the recovery of the A-share market in the first half brought most managed funds back to net asset value. That allowed investors trapped after the market turned down in late 2007 to withdraw their investment

飞雪寒冰

The same thing happened to wealth management products issued by brokers.

Wealth management products issued by securities firms are like managed funds but carry lower fees. They are backed by brokers' capital, have weaker disclosure requirement and require larger investments than managed funds.

According to the Shanghai Securities News data center, all 10 wealth management products issued before 2009 reported a net redemption of 1.78 billion units, or 22 percent of the total, in the first half, with net redemption in excess of 40 percent for five products.

In the first half, brokers issued 22 new wealth management products, or the sum of issues in the previous two years, according to Wind.

"Sales of new products went smoothly in the second quarter, thanks to gains by the benchmark Shanghai Composite Index, which rebounded above 2,500 points," an asset management executive at Guotai Junan Securities said, adding that most of the buyers are retail investors