WSJ Says China's Yu'e Bao Shrinks
Last week, The Wall Street Journal published, "Investors Pull Cash From China's Money-Market Behemoth as Yields Tumble," which tells us, "China's biggest money-market fund is experiencing a pickup in withdrawals following a slide in yields, as people take out more cash to spend and invest in other products with higher returns. Ant Financial Services Group's flagship money-market fund, which has drawn investments from more than a third of China's population, has seen a significant increase in redemptions over the past month.... One of the world's largest mutual funds, the seven-year-old Tianhong Yu'e Bao fund had 1.26 trillion yuan ($178 billion) in assets under management at the end of March." The piece explains, "In early June, the fund's seven-day annualized yield fell below China's official one-year bank-deposit rate for the first time since June 2013, according to Wind, a data provider. Tianhong Yu'e Bao's yield was recently 1.4%, versus the 1.5% benchmark deposit rate. The fund's annualized returns used to be a few percentage points above deposit rates, and its yield once topped 6%. Its assets under management previously peaked at 1.69 trillion yuan in 2018, and Chinese regulators pressured it to cut its holdings of illiquid assets. As its yields fell, many investors shifted money to other funds. The further contraction could be a relief for Chinese officials who previously worried about the giant fund's risk to the financial system. Ant, a financial-technology company controlled by billionaire Jack Ma, owns Alipay, one of China's largest mobile-payments networks with more than 900 million active users. Besides Ant's flagship fund, 28 other money-market funds from other asset managers are sold on an investment platform similarly called Yu'e Bao.... Yields on those other money-market funds have similarly fallen in recent months as China has eased monetary policy to combat a severe economic downturn caused by the coronavirus pandemic." The Journal adds, "The central bank has pumped billions into the domestic financial system and slashed the rate it charges on seven-day repurchase agreements with banks, among other measures to boost liquidity and lower the cost of borrowing for businesses and households. As a result, short-term rates including the Shanghai interbank offered rate fell, affecting the returns of money-market funds that primarily invest in low-risk, short-term assets and securities that are easy to sell. The pandemic has also led fund managers to hold more cash to meet redemptions from people who lost their jobs or received smaller paychecks during business closures or revenue declines caused by the pandemic. Wang Jun, general manager of Ant's wealth-management unit, said some people switched from money-market funds into other wealth-management products offered on its Alipay mobile app."
