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China's fund management companies are embroiled in a heated competition for customers, as the industry expands rapidly in a warmer regulatory environment.
With Monday's issuance of a monetary market fund by China Asset Management Co, the number of such funds targeting monetary market investment tools has reached six within four months.
The new fund, similar to previous monetary market funds, focuses on short-term treasury, financial and corporate bonds, bond repurchasing, central bank bills and other short-term financial tools.
The investment risk is comparatively lower than other securities investment funds, like those dominated by equity and bonds, experts said.
Such a fund will attract more conservative investors and depositors, who fear risks in stock trading. But as the fund issuing scale expands steadily and monetary market investment tools remain limited, the profit margins could also contract, said Wang Lianzhou, a fund market expert and a former member of the National People's Congress' Financial and Economic Committee.
The overall scale of the monetary market funds is close to 30 billion yuan (US$3.6 billion), so the authorities should allow fund managers to invest in more products and gradually increase the supply of short-term bonds, he said.
Investors, however, have been zealous for the new products.
The newly-established monetary market fund by Southern Fund Management Co, for example, is the largest in China. More than 8 billion fund units were sold out in five weeks to 143,000 investors, company sources said.
Some of the funds also got orders from qualified foreign institutional investors (QFII).
Cheng Baoliang, general manager of China Merchants Fund Management, China's first Sino-foreign fund management joint venture and also one of the first to issue a monetary market fund in the country, said that three QFIIs had purchased the company's monetary market fund which had a volume of hundreds of millions of yuan.
Such a fund, introduced from overseas, is a safety mechanism for investors when the bourses drop, he said.
And it is also convenient for investors to shift to other equity-focused funds when the stock market recovers.
To make the product more appealing, the company has also worked together with China Merchants Bank to provide online services to customers, who can open accounts for fund purchasing online and transfer their bank deposits to fund investment easily.
Other types of fund products have also been entering the market quickly since the start of the year, based on regulator's support for innovation.
They include a guarantee fund, an index fund, two sectoral funds and five equity and bond funds.
By the end of last week, the net assets of all securities investment funds in China had reached 205.9 billion yuan (US$24.9 billion), up 32.6 percent from September.
China's hefty individual savings, which totalled 11.6 trillion yuan (US$1.4 trillion) by the end of January, still leaves more room for expansion of the fund market, experts said.
(China Daily March 9, 2004)
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