The rapid growth in Chinese money market funds that has seen assets rise six times over since mid-2013 is predicted to slow as institutional investors overtake retailinvestors askey clients.
Ratings agency Fitch Ratings, which made the prediction, says the 231 money market funds in China together had 2.2 trillion renminbi ($353 billion) at the start of this year, more than six times total assets at the end of the second quarter of 2013.
The recent growth has come largely from retail investments into funds offered by online platforms such as Yu'E Bao, from Alipay, an affiliate of e-commerce giant Alibaba. Yu 'E Bao now represents more than a quarter of the Chinese money market fund sector, says Fitch.
Retail investors were attracted by the ease with which they could make deposits of all sizes onto funds on the online platforms. Investors also responded to good yields on money market funds, which reached 5.6% in the first quarter of 2014 and are now at 4.5%, according to the agency's research.
However, Fitch says it expects trends in this market to shift in the coming months.
"Demand for Chinese money market funds will continue to grow in Fitch Ratings' view albeit at a slower pace," says a report from the agency. "It will be more driven by institutional investors and multinational companies operating in China that are more conservative and less yield-hungry than retail investors."
The recent growth in online fund platforms has contributed to a consolidation of assets among the largest players. The biggest five money market fund houses now account for just over half of assets in China, compared with 43% in mid-2013.
Tian Hong Zeng Li Bao (Yu'E Bao) and ICBC Credit Suisse MMF, the two largest money market funds, each have more than 100 billion renminbi under management.
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