Chinese Investors Retain Hunger For High Returns - Cerulli

Tom Burroughes

28 November 2016

Years of zero, or in some countries negative, real interest rates do not appear to have dented Chinese investors’ expectations of earning returns that are some way north of a basic savings deposit rate, according to a survey by Boston-headquartered analytics firm Cerulli Associates.

A report by the firm, Asian Wealth Management 2016, said that around half of respondents to a survey expect an annual return equivalent to the one-year savings deposit rate of 5 per cent, translating into a total return of 6.5 per cent to 6.9 per cent.

The survey also found that as investors became more experienced their return expectations increased. Almost 30 per cent of respondents said they expect to make a return of over 10 per cent.

The data comes at a time when there remains concern that Chinese investors may have been running undue risks to make money, although the country has taken steps to rein in its so-called shadow banking system and the market for wealth management products. At a recent briefing for journalists, investment firm Matthews Asia told this publication that worries about the stability of the Chinese financial system are exaggerated.

“Earning high returns over a short period of time is always the ideal scenario for investors. As such, products that have good liquidity in the Chinese market, such as mutual funds, are typically churned regularly as investors seek to make a quick buck. Liquid mutual fund products can show an annual turnover of more than seven times, even fixed-income funds show an annual turnover of two-to-three times,” the report said.

Cerulli said the chase for higher returns is leading to a desire for higher-risk products. More than 70 per cent of the survey respondents said they want to invest in stock and equity products, including real estate investment trusts (REITs), in the next six months. Further, more than 50 per cent of them said that they have been introduced to stocks and equity products.