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Wealth management products catch on as stocks dip

By Wang Zhenghua (China Daily)
Updated: 2008-07-23 10:33

Tang Hanshan, 27, generated a 13-percent profit from his investments last year, but as China's stock market turned bearish last November, Tang changed his strategy.

The young man recently invested about 60,000 yuan - or half of his savings - in a wealth management product developed by China Construction Bank.

"There's no better choice at the moment," Tang said. "Bank wealth management products could help small investors like me to better fight the high CPI (consumer price index) and avoid the hazards of a bumpy stock market."

With the nation's inflation approaching 8 percent and the benchmark stock index down by more than half of its October peak, many, like Tang, choose to put their money in once-unpopular wealth management products.

Statistics show that these products - especially those designed with a lower degree of investment risks - are gaining in popularity this year.

"In the first quarter alone, the sales volume of bank wealth management products across the nation topped 910 billion yuan, exceeding the total volume generated in the whole of 2007," said Yan Qingmin, director of the Shanghai branch of the China Banking Regulatory Commission at a recent banking forum.

Bank wealth management products have made a breakthrough in the investment world once dominated by stocks and funds, generating one-third market share, said Ling Tao, a sub-director of the Shanghai headquarters of the central bank.

Yuan-denominated products with principal guarantee or with less association with stocks and those with a short maturity period were popular with investors in the first half of the year, according to a report compiled by a research institute at Southwestern University of Finance and Economics.

These renminbi-denominated products, the report said, gained popularity over products of other currencies because of an increasingly strengthening yuan.

The market share of yuan-linked products rose from 50 percent in January to 71.4 percent in June, while US-dollar-denominated products shrank from 32.4 percent to about 12 percent in the period.

Investors also favored products with lower risks, such as those with principal protection or those linked to bonds or bank credit, which took a 73 percent share of the 2,165 products churned out by 53 banks in the first half.