China funds go big on bank debt as corporate defaults rise

Shanghai

CHINESE fund managers have tightened their risk controls and are loading up on short-term paper of banks, which they consider less likely to default than companies.

Lenders sold 6.2 trillion yuan (S$1.25 trillion) of certificates of deposit (CDs) in the first half, tripling from 1.7 trillion yuan a year ago, data compiled by Bloomberg shows. While China's securities regulator banned money-market funds from buying corporate debt rated below AA+ in February, there are no limitations for CDs. HFT Investment Management Co and Ping An Asset Management Co say that they have stepped up the scrutiny of risky notes.