(Yicai) Oct. 10 — Hybrid wealth management products, which invest both in fixed-income and equity assets, have gained popularity in China because of the sustained growth of the stock market and the low interest rates of time deposits.
Many long-term customers have shifted their funds to equity-focused or hybrid WMPs when their time deposit products matured, sales staff at multiple joint-stock commercial banks told Yicai.
Time deposits are a safe option for investors with a low risk appetite. But given the declining benchmark interest rates, their investment yields have become increasingly low. As a result, some depositors have relocated their funds, which have flocked to equity-focused and hybrid WMPs due to the stock rally.
Equity assets have generally risen this year, with Hong Kong stocks and gold both logging gains of over 30 percent, and the benchmark indexes in China and the United States achieving double-digit growth, the head manager at the multi-strategy and equity investment department of the wealth management business unit of China Merchants Bank Wealth Management told Yicai.
This has contributed to expanding the return on investment gap between hybrid WMPs that include equity assets and pure bond-focused WMPs, the manager added.
The Shanghai Composite Index has risen over 17 percent so far this year, while the Shenzhen Component Index and ChiNext Index, which tracks technology companies listed in Shenzhen, surged around 31 percent and 52 percent, respectively.
Among Shanghai Pudong Development Bank Wealth Management’s WMPs, those with a relatively higher portion of equity investment have delivered better performances this year, especially those with a larger proportion of investments in technology assets or Hong Kong shares, said Liu Chi, deputy general manager of SPD Wealth Management’s equity investment department.
Due to the poor performance of the stock market in the past few years, banks’ direct investment in equity-focused WMPs remains at a nearly five-year low, said Dai Zhifeng, a banking analyst at Zhongtai Securities. Therefore, there is still significant room for growth for hybrid WMPs.
More and more hybrid WMPs are expected to be issued in the future, given their rising popularity, Dai predicted. From the second half of this year until the end of next year, more than CNY100 billion (USD14 billion) of additional wealth management funds are expected to be allocated to equity assets.
So far this year, the number of newly issued WMPs investing in equities has significantly increased, according to data from the China Banking Wealth Management Registration and Depository Center.
Twelve WMPs investing in equities have been issued in the first three quarters of this year, compared with only two for the whole year in 2024. The number of newly issued hybrid WMPs reached 202 in the same period, compared with only 169 issued in 2024.
Data from Puyi Standard showed that the scale of hybrid WMPs increased to CNY654.8 billion as of Sept. 30 from CNY647.1 billion as of June 30.
Editors: Tang Shihua, Futura Costaglione