Investor confidence is returning to the securities market despite recent market volatility as evidenced by the 11.3% increase in asset under management (AUM) of securities firms in China in the first quarter this year.
According to data released by the Asset Management Association of China, the total AUM of the top 20 domestic securities companies stood at US$1.42 trillion in first three months of 2016, up 11.3% from US$1.26 trillion as of end-2015. Meanwhile, the value of mutual funds dropped to US$1.19 trillion in the period from US$1.28 trillion as of end 2015.
“It is likely that the average rate of return of financial products in 2016 will continue to decline due to lack of good investment choices and as a result, the demand for high yield assets will rise,” says Yang Rong, analyst from China Securities.
In April, Citic bank said the average return of financial products from banks was 3.96%, down by 8 basis points from March and down from 4.22% a year ago.
The crash in the Shanghai market last year spooked several retail investors, driving many of them to deposit their cash with the banks. Financial service firm CNBENEFIT says banks have invested these deposits to other financial institutions. Banks now account for about 40% of securities assets in the first two months.
For now, Citic is the largest securities firm at US$189 billion. In 2015, Citic Securities reported a 74% increase in its profit.