Young investors hardest hit as mutual funds slump

China's mutual fund assets rose 48 percent last year, to settle at a record $3 trillion in 2020, but since the New Year, many funds have appeared looked very shaky.

By DU Meng


China's mutual fund market took a pounding in the first seven trading days following Spring Festival as numerous 10-billion-yuan funds shed more than 10 percent.

Sectors as diverse as baijiu, medicine, and new energy have taken a beating. Yinhua Wealth Fund (fund code: 180012) performed the worst, dropping 20.2 percent in the seven trading sessions since February 18. China Merchants CSI Liquor Index Fund (fund code: 161725), worth 56.8 billion yuan, lost 19.7 percent.

Financial Times reported that China's mutual fund assets rose 48 percent last year, to settle at a record US$3 trillion (20 trillion yuan). Lower interest rates born out of global monetary easing have freed up capital and made stocks more attractive. Registration-based IPOs, deregulation, and investor preferences helped the rise, with China’s mutual fund assets likely to reach US$16 trillion by 2030 according to a UBS forecast. US mutual funds are currently worth around US$23 trillion.

As of February 28, a total of 7,629 mutual funds were operated by fund management entities in China, of which 360 topped 10 billion yuan. Market sentiment for new funds was positive in the opening weeks of 2021, as evidenced by oversubscription. As of January 19, active equity funds launched in 2021 received subscriptions of $58 billion, but the actual funds raised were capped at US$28 billion.

Many young people have opened fund accounts and this was their first chance for a bite of what turned out to be a pretty unappetizing pie. Around 40 percent of China's post-90s generation is willing to invest in mutual funds, according to the 2020 Annual Report on the Behavior of Chinese Stockholders compiled by Tencent Securities.

The Survey and Research Center for China Household Finance claimed that over half of new fundholders who signed up last year were born in the 1990s.