100 scholars foresee 2024|Dong Ximiao: The bank wealth management market may stabilize and rebound

　　China-Singapore Jingwei, January 12 (Xinhua) -- The bank wealth management market may stabilize and rebound

　　Author: Dong Ximiao, Chief Researcher of Zhaolian, Adjunct Researcher, Institute of Financial Research, Fudan University

Dong Ximiao

　　At the beginning of the new year, the board of directors of Zheshang Bank announced that its wealth management subsidiary, Zheshang Wealth Management, had been approved for establishment. This is the first time that the Department of Supervision of Asset Management Institutions of the State Administration of Financial Supervision has approved the establishment of a wealth management company after its establishment. As the main force in the bank wealth management market, wealth management companies are growing. The improvement of the professional capabilities of banks and wealth management companies and the accelerated recovery of macroeconomic and financial resources may promote the stabilization and recovery of the wealth management market in 2024 and continue to become an important choice for residents' investment and wealth management.

　　At the beginning of 2023, affected by multiple factors such as the aftermath of the net redemption of wealth management products and seasonal effects, the scale of the wealth management market continued to be under pressure, and the scale fell to about 25 trillion yuan at the end of the first quarter, the lowest point of the year. Over the past year, banks and wealth management companies have taken various measures to respond to market changes. Some wealth management companies have adjusted their asset allocation strategies and launched more wealth management products that are valued using the amortized cost method to smooth the impact of market fluctuations on the net value of wealth management products. Some wealth management companies bind their own interests more closely with the interests of investors through self-purchase. Most wealth management companies have lowered the fixed management fees and sales service fees of wealth management products, and some even reduced the related fees to zero. These measures have stabilized investor confidence and market expectations to a certain extent. With the continuous recovery of wealth management net value and the continuous strengthening of communication between banks and wealth management companies with investors, the scale of bank wealth management has gradually stabilized and rebounded. According to data from the banking wealth management registration and custody center, as of the end of November 2023, the balance of wealth management products was 27.66 trillion yuan, which has rebounded to the level at the end of 2022.

　　Since the beginning of 2024, the overall "net failure rate" and "negative rate of return" of wealth management products have gradually declined, the market scale has ushered in a rebound, and the weight-containing products and fixed income products have achieved growth, and the wealth management market has achieved a "good start". Looking forward to the whole year of 2024, with the stabilization of China's financial market, the change of investors' risk appetite and the improvement of the capabilities of banks and wealth management companies, the bank wealth management market is expected to come out of the trough of the previous two years in 2024, showing a trend of promoting stability and seeking progress while maintaining stability. From the perspective of wealth management scale, the balance of wealth management products is expected to increase from about 27 trillion yuan in 2023 to 29 trillion yuan, that is, to recover to the level at the end of 2021; from the perspective of the number of investors, wealth management investors are expected to continue to maintain steady growth after exceeding 100 million; from the perspective of asset allocation results, the proportion of bonds, public funds and equity assets is expected to rebound under the premise of continuing the "28" law (that is, 80% of safety cushion assets and 20% of Bo income assets). This is mainly because:

　　First of all, the overall positive macro policy will provide a good foundation for the development of the wealth management market. Judging from the expressions of the Central Economic Work Conference such as "promoting stability through progress" and "establishing first and then breaking", the fiscal policy is expected to be further strengthened in 2024 and carry the "banner" of stable growth, and the monetary policy is expected to continue the loose tone, allowing more funds to reach the entity directly. This will provide strong support for economic recovery, and then provide more and better asset allocation options for wealth management products.

　　Second, the continuous growth of residents' savings will provide more capital inflows for wealth management products. Since November 2022, the "excess savings" of the household sector have begun to rise significantly, and as of the third quarter of 2023, residents still have 7.5 trillion yuan of "excess savings". In this context, as residents' risk appetite recovers, wealth management products with stable overall performance will attract more residents' savings inflows.

　　Thirdly, the continued decline in deposit rates will further enhance the attractiveness of wealth management products. In 2024, the downward trend of deposit interest rates will continue against the backdrop of banks' fee reductions and interest concessions to the real economy and continued pressure on net interest margins. With the decline in deposit interest rates and the improvement of residents' expectations, the advantages of excess returns over time deposits will be further highlighted, and their attractiveness will be further enhanced.

　　However, in the face of market volatility and diversified investor needs, how to achieve a dynamic balance between the "impossible triangle" of safety, profitability and liquidity will be a long-term challenge. In 2024, banks and wealth management companies should accelerate the introduction and training of professional talents, continuously improve their ability to study and judge the macro situation and financial markets, continue to improve their investment research capabilities and asset allocation capabilities, and provide differentiated products and services for investors with different needs. At the same time, we will strengthen market communication, carry out various forms of investor education activities, strengthen the principle of "sellers are responsible, buyers are responsible", continue to improve national financial literacy, and guide investors to develop value investment and long-term investment concepts.

　　At present, there are 31 wealth management companies in China, and the controlling shareholders include large banks, joint-stock banks, urban commercial banks, rural commercial banks and foreign financial institutions. The stage of large-scale centralized establishment of wealth management companies has ended, and it is now in the stage of normalized establishment, and the financial regulatory authorities issue wealth management company licenses in accordance with the principle of "one mature, one approved". If approved, it will become the 32nd wealth management company in China and the third wealth management company registered in Zhejiang. While strictly controlling the "entry gate" of wealth management companies and steadily promoting the approval of wealth management companies, the financial regulatory authorities should actively study and optimize new models and paths for small and medium-sized banks to set up wealth management companies, better meet the strong desire of small and medium-sized banks to develop wealth management business, and strive to reduce the "Matthew effect" of wealth management companies on the banking system. For example, support rural credit cooperatives and provincial-level institutions (such as rural commercial joint banks) to take the lead in initiating the establishment of wealth management companies.

　　Small and medium-sized banks should rationally apply for the establishment of wealth management companies based on their own development orientation and professional capabilities. For most small and medium-sized banks, it is difficult to set up a wealth management company, so they should seize the time window when the sales of wealth management products are not open to third parties, build and improve the distribution system, train professional product managers and financial consultants, vigorously develop the distribution business of wealth management products and other financial products, and build themselves into a "financial product supermarket", and strive to seize the opportunity of the wealth management market. (Sino-Singapore Jingwei APP)

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