Infrastructure funds come under pressure after govt guarantees end

The value of trust funds established in the fourth quarter contracted 25 percent year-on-year to 223.7 billion yuan ($36.1 billion), the first year-on-year decrease since 2008.

User-trust.com, a data services platform, said that property-based trust funds fell by the largest amount among all categories. The aggregate value of new property trust funds was down 68.6 percent to 31.2 billion yuan, and the average term slid from 1.84 years to 1.65 years.

Market sources said that mounting default risks amid slowing economic growth led investors to take a negative view of the sector, and some trust firms even dropped some proposed plans.

"We observed some defaults earlier this year, and a quite number of those defaults occurred among property trusts. We now scrutinize property-based proposals more closely to reduce risks," said Zhang Bo, a product manager at Shanghai-based Huabao Trust Co Ltd.

Infrastructure trusts, which were formerly guaranteed by local governments, are under intense pressure. Guarantees were eliminated in October on the order of regulators, said Zhang.

User-trust.com's data also showed that about 1.4 trillion yuan of infrastructure trusts matured in 2014 - about three times as much as in 2013.

As funds flow into the newly bullish stock market, fixed-income trusts have lost popularity, said analysts.

"Yields from stock-backed products are rising fast and investors prefer the A-share market over everything else in recent months," said a report by GF Securities Co Ltd.

"It has been a long time since we had such a bullish A-share market, so I want to seize the opportunity," said Song Yuqin, 54, a Shanghai investor.

This trend is also supporting some stock market-backed trust products, which were among the few categories that saw growth in scale in the fourth quarter. New stock market-backed trusts worth about 65 billion yuan were established during the fourth quarter, up 11 percent year-on-year.

wuyiyao@chinadaily.com.cn