(Yicai) Dec. 31 -- The yield of China’s largest money market fund, Tianhong Yu’ebao, which is owned by fintech giant Ant Group, has fallen 48 percent this year, following a series of interest rate cuts by the central bank.

The average seven-day annualized yield of Yu’ebao was 1.24 percent yesterday, compared with 2.39 percent in early January, according to Wind Information data. At China’s 364 money market funds, it was 1.48 percent, down from 2.34 percent.

Despite this decline, the total size of money market funds has grown, reflecting ongoing demand for low-risk investments. They had CNY13.03 trillion (USD1.79 trillion) of assets as of Sept. 30, an increase of CNY1.76 trillion (USD241.1 billion) from the end of last year, the largest gain of any fund type this year, according to the Asset Management Association of China.

The People’s Bank of China lowered its policy rates several times this year, guiding the benchmark Loan Prime Rate and bond market financing rates lower. The one-year and over five-year LPRs were cut three times, falling to 3.1 percent from 2.45 percent and to 3.6 percent from 4.2 percent, respectively, with both now at historic lows.

China’s top leadership pledged earlier this month to embrace a “moderately loose” monetary policy next year in a move away from the “prudent” stance followed over the past 14 years. Given that, yields may fall further in the short term, Zhi Yuan, deputy director of the cash management department of Wanjia Asset, told Yicai. 

“But the short-term drop in money market fund yields will not affect their payment and allocation functions,” Zhi added.

Among all savings products, money market funds still offer a relatively higher return on investment, as most major Chinese banks have cut deposit rates to less than 0.2 percent. Citic Securities said it expects funds to be redirected to other short-term bonds as a result of lower deposit rates.

Editor: Futura Costaglione