In April, the scale of financial management regained its upward momentum.

Data indicates that the scale of the financial management market increased by about 200 billion yuan month-on-month in April. Industry insiders say that the impact of the reduction in bank deposit interest rates is gradually becoming apparent, with many corporate and individual funds shifting to financial management. However, the financial management market, which has added 200 billion yuan, is facing fluctuations in net value. Under these circumstances, can the scale of financial management continue to grow in the future?

Deposits support the rebound in the scale of financial management.

After nearly half a year of continuous decline, the scale of bank financial management has welcomed an increase. According to data from the research department of CITIC Securities, the scale of financial management products in the whole market increased by about 200 billion yuan month-on-month in April, reaching 28.63 trillion yuan, with a month-on-month growth rate of 8.74%.

Looking at the weekly performance, the financial management market welcomed a sharp increase in scale month-on-month in the first week of April, reaching 161 billion yuan. The second and third weeks continued to decline, but the growth amount remained at the level of tens of billions of yuan, with the remaining scale being 17.9 billion yuan and 16.83 billion yuan respectively. The last week saw a significant decrease in the increase, with an additional scale of 10.9 billion yuan.

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In the view of industry insiders, the record high in the scale of financial management is the continuation of the "deposit migration" momentum under the low-interest environment and the result of the comparative advantage of yield rates. Wang Yifeng, a banking industry analyst at Everbright Securities, pointed out that since the beginning of this year, high-interest deposits formed through shell insurance asset management, manual interest supplementation, and other methods have been restricted one after another, showing the power of "disintermediation" of deposits, and funds invested in deposit products have shifted to financial management.

Ming Ming, the chief economist of CITIC Securities, believes that there are three major reasons behind the stop and rebound of the scale of bank financial management. The first is the continuous outstanding financial management returns that attract investors, the second is the gradual emergence of the impact of deposit interest rate cuts, and the last is that after manual interest supplementation is restricted, a lot of funds have poured into financial management.

The bond bull market this year has also supported the performance of financial management returns. Under the relative advantage, it has promoted the growth of the scale of financial management. According to the reporter's observation, after the deposit products with three consecutive interest rate cuts in 2023 and the "adjustment and reduction" of deposit products by small and medium-sized banks this year, the yield level has fallen to a historical low point. The market's 3-year and 5-year deposit product interest rates are less than 2.5%, and the interest rates of deposit products with a term of 1 year or less have even fallen below the 2% level.

In contrast, the yield of financial management products with the same term has a comparative advantage. According to data provided by the third-party statistical agency Puyi Standard, as of the end of April, the average performance comparison benchmark of the 2,523 new financial management products issued in the whole market was 3.05%, the performance comparison benchmark of closed-end fixed-income financial management products was 3.15%, and the mixed type reached 3.57%.From the perspective of the ultimate performance of products, wealth management products also outperform the return rate of deposits. As of the end of April, the average annualized return rate of the remaining closed-end fixed-income wealth management products in the entire market over the past month reached 4.08%, and the annualized return rates for the past three months, six months, and one year were 4.39%, 4.52%, and 3.96%, respectively.

Reporters have learned that in the face of the continuous decline in deposit interest rates, many residents have started to study bank wealth management products. "In March, I bought a fixed-income wealth management product issued by a wealth management company under a state-owned bank, and the return rate reached 4.8% last month," Bai Jing (a pseudonym), who lives in Hangzhou, told the reporter.

In addition to residents, many enterprises are also increasing the number of wealth management products they purchase. According to incomplete statistics from Wind data and listed company announcements, the scale of listed companies' subscription to deposit products this year is about 106.9 billion yuan, accounting for about 65.5% of the total scale of investment and wealth management, while last year this product accounted for about 84.49%. At the same time, the subscription scale of listed companies to wealth management products is on the rise. This year, listed companies have purchased bank wealth management products worth 15.416 billion yuan, accounting for about 9.45%, compared to about 7.4% in the same period last year, a slight increase of 2 percentage points.

Several wealth management managers from joint-stock banks and city commercial banks also told reporters that recently, regulatory measures such as prohibiting manual interest supplementation and standardizing notice deposits have led to a reduction in deposit product interest rates. The main customers for these high-interest products are enterprises. After these products are restricted and rectified, many corporate customers choose to put their money into wealth management products, "supporting the return of deposits to wealth management."

Breaking through 30 trillion yuan?

Compared with low-interest deposits, the wealth management market scale can regain its upward momentum, relying on its small fluctuations, strong flexibility, and relatively high return rates. However, the fluctuation of wealth management net values has worried many investors. Bai Jing told the reporter that he still has several wealth management products with an R2 risk level, and the recent fluctuation range of net values is somewhat unexpected. It has been retracted for five consecutive trading days, with a cumulative decline of about 0.12%. A 200,000 yuan investment cost can lose more than a hundred yuan in one day.

However, in the view of industry insiders, the recent net value retraction of some products is a normal fluctuation. A person in charge of the financial market department of a joint-stock bank told the reporter that the recent net value retraction of some products is closely related to the fluctuation of the bond market and can be regarded as a phased adjustment. Essentially, it is a callback of the underlying assets, especially long-term bonds, which have soared in the previous period. It is a normal asset retraction range and there is no need to worry too much.

Ming Ming also believes that although the long-term bond market interest rate has rebounded at the end of April, it has not yet affected wealth management, and the net-breaking rate is still at a low level. He expects that the scale of wealth management in May will still maintain a high level. Even if there is a significant seasonal retraction in June, it is expected to maintain around 28 trillion yuan, and it is expected to reach a high point of 30 trillion yuan in the second half of the year.

Since the beginning of the year, many industry insiders have predicted that the wealth management market will regain its upward momentum this year, reaching an increase of 30 trillion yuan. Industry insiders believe that this figure is still supported by optimistic factors. Wang Yifeng believes that there is still a large space for deposits to "disintermediate" and transfer to the wealth management space. In the future, it is also possible that the listed interest rates of deposits will be further reduced. If the interest rates are concentrated and reduced, it may prompt corporate or institutional demand deposits to enter the money market, thereby forming purchasing power for wealth management or other non-bank products.

Ming Ming further explained that under the pressure of the interest spread of commercial banks, the necessity of deposit interest rate reduction is still high. The local government's debt resolution demand requires the support of a low-interest-rate environment, and the repair of the real economy's financing demand is constrained by the high actual interest rate. The recent Politburo meeting mentioned the goals of interest rate reduction and cost reduction, and it is expected that subsequent deposit and MLF interest rate reduction operations are possible. Considering the demand for the stability of the RMB exchange rate, the timing of the MLF interest rate reduction may still need to be observed. From the perspective of the whole year, there may be about 20BP of adjustment space for the MLF interest rate.In addition to the acceleration of "deposit migration" in a low-interest-rate environment, which is expected to bring continuous incremental funds to the wealth management market, the strategy of lengthening the duration of wealth management to enhance returns is also becoming apparent, potentially opening up new growth opportunities. Industry insiders point out that in terms of term allocation, wealth management subsidiaries in April further reversed the strategy of selling long and buying short to shorten the duration, and interest-bearing bonds have also gradually started to demand duration for returns.

Liu Yu, Chief Economist at Huaxiang Securities, believes that since the beginning of this year, with the tightening of regulations on corporate deposit business, some channel-type investment methods of wealth management may be restricted, and the newly added scale will return more to bond market investments. This also means that the pricing power of bank wealth management in the credit bond market will be significantly enhanced. At the same time, the current demand for wealth management investment channels remains strong, so wealth management and various types of asset management accounts may become an important marginal force for short-term buying.

However, some industry insiders also warn of market operation risks. "While the scale of wealth management is increasing rapidly, it also faces the pressure of under-allocation due to restrictions on high-interest deposit allocation and the still large bond supply and demand contradiction." Dong Wenxin, an analyst at Everbright Securities, pointed out that in April, fixed-income wealth management products with higher scale growth significantly increased their allocation to medium and short-term bond funds. However, the current large-scale allocation of wealth management to medium and short-term bond funds will also lead to an increase in the trading congestion of medium and short-term bond types, with bond yields at a historical low. The expected game between public funds and wealth management may increase the potential market fluctuation risk, thereby breeding potential risks of a negative cycle.