Chinese MMFs experienced a rapid and pronounced expansion in assets from the second half of 2013, which made the country the fifth largest MMF domicile globally.
By the beginning of 2015, the total assets of the 231 active Chinese MMFs reached RMB2.2trn ($353bn), which is more than six times their level 18 months ago.
“This was mainly driven by retail investments in e-commerce related funds, which are linked to online payment platforms, and MMFs’ attractive yields,” the rating agency said.
Institutional investment represented only 30% of assets at mid-2014, but they rose 50% during first half of 2014, reaching RMB442bn on 30 June.
According to Fitch, demand for Chinese MMFs will come increasingly from institutional investors and multinational companies operating in China, which are less yield-hungry than retail investors.
“MMFs are gaining popularity among institutional investors since the internationalisation of the renminbi and because they can meet the cash management needs of companies operating in China.”
Chinese MMFs have varied risk profiles. According to Fitch ratings, money market funds in the “AAA(chn)” category meet the highest standards for credit quality, conservative investment policies and security of invested capital relative to other funds in China.
AAA(chn)-rated funds (and equivalently-rated funds ) have a greater focus on short-dated assets of high credit quality, notably short-dated exchange-traded repos. This reflects their primary objective of providing investors with liquidity and stability in their capital investment.
Retail MMFs invest heavily in term deposits and bonds and typically have a longer weighted average maturity.
