China's wealth-management product boom seen cooling on new rules

[SHANGHAI] China's multi-trillion dollar boom in wealth-management products, under scrutiny around the world because of potential threats to financial stability, is set to cool as yields fall on tighter regulation, according to China Merchants Securities Co analyst Ma Kunpeng.

Mr Ma cited a "significant slowdown" in the products' growth in the first half and said that WMPs may shrink in the future, with money flowing elsewhere, in an e-mailed note dated Sept 4. He didn't say when.

Banks have started to lower yields on WMPs in preparation for requirements for funds to be held in third-party custody, the analyst said, adding that such a change may be implemented over six months to a year. Currently, lenders can use newly invested money to pay off maturing products.

The Chinese government and agencies including the International Monetary Fund are focused on potential risks from WMPs that rose to a record 26.3 trillion yuan (S$5.3 trillion) as of June 30.

BLOOMBERG