how to allocate assets in a low interest rate environment
2024-10-06
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the official website of the people's bank of china shows that starting from september 27, 2024, the deposit reserve ratio of financial institutions will be reduced by 0.5 percentage points (excluding financial institutions that have implemented a 5% deposit reserve ratio); starting from september 27, the open market the 7-day reverse repurchase operation interest rate was adjusted from the previous 1.70% to 1.50%, while guiding the loan market quotation rate and deposit interest rate to fall simultaneously. since the beginning of this year, many banks have lowered their rmb deposit interest rates. for investors accustomed to deposits and financial management, the most direct impact is lower returns. in fact, since 2023, banks have taken the initiative to lower deposit interest rates many times. faced with this situation, residents’ wealth appreciation and preservation will face more challenges. how should investors take care of their money bags?
the downward trend continues
recently, a number of major state-owned banks have intensively lowered their listed deposit interest rates, with the two-year, three-year and five-year rmb time deposit rates adjusted to 1.45%, 1.75% and 1.8%. this is a new round of concentrated adjustments in the listed deposit interest rates this year. this round of interest rate adjustments focuses on the listed deposit interest rates, and the interest rates on medium and long-term deposits have been reduced even more.
li yifan, a researcher at the bank of china research institute, said that this round of interest rate adjustments shows the characteristics of major state-owned banks taking the lead in lowering interest rates and other banks following suit. for major state-owned banks, the interest rates for demand deposits were reduced by 5 basis points; the interest rates for two-year, three-year, and five-year term lump sum deposits were all reduced by 20 basis points; the interest rates for call deposits and agreement deposits were both reduced by 10 basis points; deposit interest rates for various periods, including lump-sum deposits and withdrawals, lump-sum deposits and partial withdrawals, and principal and interest withdrawals, were reduced by 10 basis points. the adjustment range of deposit interest rates of joint-stock banks is generally the same as that of major state-owned banks, with the maximum reduction being 20 basis points.
generally speaking, this round of interest rate adjustments covers all types of bank deposits. the reduction in medium and long-term deposit interest rates is larger and has the characteristics of asymmetric reduction. the adjusted time deposit interest rates of most joint-stock banks are slightly higher than those of large state-owned banks. . industry insiders said that after this round of adjustments, other small and medium-sized banks are expected to follow suit in due course.
what are the driving factors for this round of interest rate adjustments? experts said that this is a proactive adjustment made by commercial banks based on market changes and their own asset and liability management needs. at present, the trend of regular deposits in commercial banks is still obvious. the strong rigidity of deposit costs has increased the cost pressure on the liability side to a certain extent and affected the level of interest spreads. in the first quarter, the net interest margin of my country's commercial banks was 1.54%, a year-on-year decrease of 0.2 percentage points, reaching a historical low. the shrinking net interest margin space has brought challenges to commercial bank operations, prompting commercial banks to proactively lower deposit interest rates to ease interest margin pressure.
the "decision of the central committee of the communist party of china on further comprehensively deepening reform and promoting chinese-style modernization" proposes to improve the macro-control system and coordinate the advancement of reforms in key areas such as finance, taxation, and finance. in recent years, financial management departments have integrated reform with regulation. on the basis of basically establishing interest rate formation, regulation and transmission mechanisms, they have clarified main policy interest rates, cleared monetary policy transmission channels, and continued to deepen the market-oriented reform of interest rates.
since 2021, the people's bank of china has optimized the method for determining the upper limit of deposit interest rates of commercial banks, guided the interest rate self-discipline mechanism to establish a market-based adjustment mechanism for deposit interest rates, and given the market-oriented characteristics of "following the market" in deposit interest rate adjustments. this round of reductions in the listed deposit interest rates is the fifth round of centralized reductions since the establishment of the market-based adjustment mechanism for deposit interest rates in april 2022. it is also a manifestation of commercial banks' compliance with the requirements of the deposit interest rate pricing reform and the reform of the deposit interest rate market-based adjustment mechanism to promote deposits. interest rates remain relatively reasonable.
chain reaction appears
recently, the central bank has launched a "combination" of interest rate cuts to guide market interest rates downward by lowering policy interest rates.
liu sijia, a researcher at puyi standard, said that the people's bank of china's move will help boost the market. in the context of the liberalization of deposit interest rates, many commercial banks have announced reductions in deposit listing interest rates based on the recent central bank interest rate cuts and market interest rate trends such as government bond yields. . this can, to a certain extent, reduce banks’ liability costs, alleviate the current pressure on banks’ net interest margins, and maintain the sustainability of financial services for the real economy.
li peijia, head of the china financial team of the bank of china research institute, said that against the background of generally weak financing demand in the real economy, loose monetary policy, and maintaining a basically stable net interest margin, deposit interest rates are generally easy to fall but difficult to rise. more small and medium-sized enterprises banks may join the bandwagon of lowering deposit interest rates.
in this round of interest rate cuts, many banks have adjusted interest rates on demand deposits and multi-term time deposits, resulting in a series of knock-on effects. there is still pressure on banks' net interest margins, and superimposed supervision prohibits manual interest payments. many banks have imposed purchase limits on deposit products such as call deposits and certificates of deposit with relatively high interest rates, and some products have been suspended. at the same time, some agreed deposit interest rates have also been severely restricted.
driven by various factors, the phenomenon of "deposit relocation" gradually emerged. li peijia said that currently, the three-year deposit interest rates of some small and medium-sized banks still have products prefixed with "3". however, taking into account factors such as convenience and stability, the scale of this deposit transfer will not be too large. at the same time, some deposits may also be diverted to the financial management market.
with the reduction of deposit interest rates, the excess return advantages of low-risk cash management products, fixed-income financial management, public funds and other products have become more prominent, and the product shelves have abundant choices.
liu sijia said that judging from the recent changes in the scale and structure of bank financial management and public funds, some medium and low-risk asset management products with better liquidity and relatively stable income performance have gained attention: in terms of bank financial management, cash management products and fixed income products the scale increased relatively significantly in the second quarter of this year, but fell back at the end of the quarter due to seasonal factors. among them, cash management products and some short-term open-ended fixed-income products attracted market attention, and their overall income performance was relatively stable, and compared with deposit products, they have certain income advantages. some daily open and shortest holding period products have certain flexibility in liquidity management and are favored by some investors in the current market environment. in terms of public funds, currency funds have recently the scale of open-end bond funds and open-end bond funds has increased, which also reflects the current investment characteristics of investors pursuing stable returns and increasing liquidity preferences.
the industry is undergoing changes
industry insiders believe that at present, the asset management industry is full of challenges and changes, and the development of the asset management industry in a low interest rate environment is showing a new trend.
li peijia said that first, the scale of bank financial management has been restored. after experiencing the trouble of "breaking the net" in 2022, the scale and market share of bank financial products will decline in 2023, but this situation has changed since this year. the "china banking industry financial management market semi-annual report (first of 2024)" shows that there are 239 banking institutions and 31 financial management companies across the country with existing financial products, with an existing scale of 28.52 trillion yuan, a year-on-year increase of 12.55% and an increase of 6.43% from the beginning of the year. . as more banks join the bandwagon of lowering deposit interest rates, the scale of wealth management is expected to continue to grow in the second half of the year. this is mainly related to the fact that bank financial investment is relatively more cost-effective in the context of falling deposit interest rates. second, public funds grew against the market trend and continued to replace bank financial management as the top spot in the asset management industry. in recent years, the equity market has been relatively sluggish, but the asset management scale of public funds has repeatedly achieved growth against the trend, surpassing the scale of bank financial management and becoming the industry leader in 2023. this year, the trend continues. at the end of june, the asset management scale of public funds reached 31 trillion yuan, continuing to exceed bank financial products in both growth rate and absolute scale.
from an investor's perspective, in the face of numerous and complex financial products, scientific asset allocation is the core. on the premise of confirming that the financial management institution is legal and compliant, it is necessary to understand the characteristics, risks and investment periods of different financial products. yuan yulai, founder and ceo of financial cube, believes that asset allocation is not static, but needs to be adjusted in a timely manner based on market dynamics and personal capital needs. if investors expect to need funds within two or three years, they should choose a more flexible asset allocation strategy to deal with possible market fluctuations. at the same time, risk assessment and control should be done to ensure the safety and stability of assets, and on this basis, appropriate investments should be considered. additionally, diversification should be done to spread risks and avoid putting all your eggs in one basket.
currently, there are many channels for displaying fund performance and other related data on the market, but risks and returns are rarely put together for comprehensive display. yuan yulai said that in terms of product selection, financial management institutions should continue to expand the types and quantities of platform assets to ensure a sufficient supply of assets; by objectively displaying historical risk and return performance, they should help investors choose high-quality financial products that meet their needs.
liu sijia suggested that investors can combine deposit products and various types of asset management products based on their own financial management preferences and allocation needs, combined with market trends, to diversify risks while improving the flexibility of portfolio returns, and fully understand the difference between financial management and deposits. respond rationally to falling interest rates on deposit products.
looking forward to the market outlook, the improvement of domestic effective demand will still be the core focus of future economic growth. in the later period, the central bank's monetary policy is likely to maintain a loose tone, and there is still room for downward decline in deposit interest rates. (economic daily reporter wang baohui)
source: economic daily
