WMPs winning over listed firms

A growing number of mainland-listed companies are sheltering their money in wealth management products (WMPs) offered by Chinese banks, according to a Securities Times report Monday.

During the first eight months of this year, 88 listed companies announced their intentions to place a combined 25 billion yuan ($3.94 billion) into WMPs, well above the 22 listed firms which channeled 10 billion yuan into such products during the first 10 months of 2011, according to figures from the Securities Times.

Behind the growing demand for WMPs is a pressing need for companies to find a low risk place to park their idle capital, Liu Feng, a supervisor from the Financial Planning Standards Board (China), told the Global Times. "Given the weakening economy at home and abroad, companies have little incentive to expand their production, which has left them more money to invest in the capital market," Liu said, who also added that over 70 percent of domestic listed companies have invested in the stock or bond market this year, however 40 percent of these companies suffered losses on such investments.

"Banks' wealth management products have naturally become more attractive to businesses as their risks are controllable," he added.

Most companies choose principal-guaranteed WMPs with annual yields of 3 to 4 percent, a customer manager from Bank of Communications, who asked to remain nameless, told the Global Times. "It is as safe to purchase these products as it is to place money into a savings account, but WMPs offer higher returns," the manager said.

Also, as China's listed firms watch the slowing global economy erode their profits, some are turning to WMPs to shore up losses in their primary business operations, Liu said.