When Alibaba launched its online money market fund Yu’ebao back in 2013, it was hailed as a revolution. Certainly, consumers saw it that way – within six months of its launch, Chinese consumers had invested more than US$40 billion in the fund. And it was no wonder why: by that six month mark in January of 2014, Yu’ebao was posting a yearly return rate (yield) of more than 6 percent. Who wouldn’t sign up for that?
The fund has been affected by China’s slowing economy, though, and in the past week, Yu’ebao hit a new all-time low. Return rates dropped below 3 percent for the first time ever last Wednesday, and sunk as low as 2.94 percent this Monday before recovering. As of this writing the rate is back up to around 3.1 percent.
Given China’s broader economic outlook, this should come as no surprise. But it could be bad news for Yu’ebao if dropping returns cause more customers to pull their money out of the fund. That has happened before. In the summer of 2014 the fund saw returns fall from above 5 percent to just over 4 percent between May and October; during that same period Yu’ebao’s assets dropped by several billion, suggesting that customers had pulled quite a bit of their money out of the fund.
Of course, Yu’ebao isn’t alone here – other internet money market funds, like Tencent’s WeChat funds, have seen similar drops, so consumers are unlikely to find better yield numbers elsewhere. Analysts suggest that the drop in fund yields is closely related to the relaxing of government currency policies and the drop in interest rates from China’s central banks.
Tech in Asia contacted Alibaba for comment on this story and will update it if we hear back.
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