The trend marks a reversal in the risk-seeking behaviour seen during March-June and has caused the country’s blue-chip index to pull back from its highest in more than five years.
(GRAPHIC – China’s major indexes had witnessed big swings since mid-July, prompting investors to seek shelter in money market funds: https://fingfx.thomsonreuters.com/gfx/buzz/azgpokzmlpd/China’s%20major%20indexes%20had%20witnessed%20big%20swings%20since%20mid-July.jpg)
MMFs are traditionally considered low-risk and liquid as they normally invest in high-quality assets, including government bonds, and yield is closely related to general cash conditions in the financial system.
Hwabao Tianyi ETF (SS:511990), the largest money market ETF listed on the Shanghai Stock Exchange, saw its total units increase 35.6% to 968 million on Aug. 3, from 714 million on July 13 when the CSI300 blue-chip started to retreat from its five-year high.
“Some investors, in particular those heavily leveraged, want to exit the stock market for the moment given the big uncertainties around the Sino-U.S. tensions, and park their money in the money market funds,” said Zhang Chengyu, vice general manager of Beijing-based Shiji Hongfan Asset Management Co.
(GRAPHIC – China’s money market ETFs saw inflows since mid-July as investors pulled money out of equities on rising volatility: https://fingfx.thomsonreuters.com/gfx/buzz/nmovaldxxpa/China’s%20money%20market%20ETFs%20saw%20inflows%20since%20mid-July%20as%20investors%20pulled%20money%20out%20of%20equities%20on%20rising%20volatility.jpg)
China’s major indexes saw two sessions of big plunges on July 16 and July 24, as worries mounted over policy tightening, following better-than-expected GDP data in the second quarter, and over escalating Sino-U.S. tensions.
In July, the CSI300 and SSEC had both shed as much as 8% in their recent corrections, but they are up and 16.6% and 10.5% for the year, respectively.