GUANGZHOU (Fund China) - The equity and bond funds are popular this year, making the money market fund caught little attention. But in fact, the money market fund is indeed a good financing tool for investor. The dedmand deposit is indispensable for the household asset allocation, and how can this part’s yield avoid from the loss caused by a 0.09 percent cut in a five-year increased demand deposit rate announced by the Central Bank in the sixth interest adjustment. The financing experts suggested choosing the money market fund as a substitute for the the demand savings.

The market Repo Rate hit a high record again and again since a continual capital tensions appeard after the big borad new shares’ intensive published and brought a new chance for the money market fund yield’s increase. The money market fund’s average annual yield nearly reached 3.3% since 2007( up to 21th Dec.) compared to the 2% more or less in 2005 and 2006. and the one-year time deposit rate after tax was 3.676% since the central bank’s 21th Dec adjustment.

There are 43 money market funds seven days annual yield excess 5% of the 51 funds in the two grades (A and B ) showed from the 21th Dec. data. Especially the Great Wall Money Market Fund and Jutian Money Market Fund’s annual yield were up to 8.675% last week. The yield was more than ten times of the demand deposit rate.

As a substitute for Demand Savings, the money market fund includes no subscription fee, IPO and redemption fees when speculation. It almost does not create any investment cost. Most of the money market funds are with a low threshold for 1,000 yuan, and are more suitable for the general public.

The disadvantage is that most of the opened money market fund’s redemption needs a “T+2″ days( a small part needs “T+1″ days) compared to the demand saving. That is when applying a redemption to the fund managements, it needs one or two days to receive the money in the Bank account, a lower liquidity than demand saving.

There are 51 money market funds in the market including 40 grade A funds and 11 grade B funds. The difference is that the Grade A funds’ threshold for 1000 yuan. It is suitable for the pubic. But the Grade B money market fund is over one million yuan. It is for the institutional speculation.

There are some tips in the money market fund speculation. For example, hold the old funds, not the new funds. And differented from the equity funds, themoney market fund yields’ gap is not great, but the old money market fund are more mature in manipulation, more ownning in high-yield varieties and have a certain of investment experience.

Furthermore, it is better to select the appropriate scale of money market fund. The large-scale money market fund has a fixed transaction cost saving advantages inter-bank market, but too large scale may lead to a unsuitable varieties for investment, thereby affecting the earnings.

Same as the equity funds, the money market fund can also has its drect sales channels through banks, brokerage firms and fund managements,and so on. but not all banks underwrite money market fund. The bank channels are Bank ICBC, the Bank of China, Agricultural Bank of China, China Construction Bank, Bank of Communication and the China Merchants Bank.

keywords

Money market fund, investing in the short term securities in the money market. Such as treasure bills, commercial paper, bank certificates of deposit, government short-term bonds, corporate bonds, the interban deposit, etc..

Seven days annual yield: converted the latest 7 days average yield to annual yield. For example,the seven days annual yield on December 21, that is, average of proceeds gains from 15 to 21 December for seven consecutive days, then the average yield multiplied by 365 days.

Relative news

A pause in money market fund due to a net mint-subscription

Up to present, the quota of Harviest Monetary Fund is nearly 10 billion, and in the September 30, the third quarter, the Harves money market fund only collected 6.2 billion around. In other words, nearly 40 billion yuan influx to the Harvest money market fund in more than two months after the September. At the same time, the the ICBC Credit Suisse money market fund, Southern Cash income fund and the Hua’an cash income fund also emerged in huge net subscription.

At the same time, including the Jutian fund management, Fortune SGAM Fund Management, China Merchants Fund Management, E-Fund Management, China International Fund Management announced the money market fund subscription and conversion amd transition business suspended this week, some fund analysts say this is mainly because whenever the equity market closed for holidays, a large number of institutions capital will inject into the money market fund in the last 1-2 days before the closed market for its higher yield level than the bank demand saving rate.

But it is very difficult in the coming financial investment out before the holidays, they often diluted MMF holders’ original yield. In order to protect the MMF holders’ profit, many fund managements will alter to a suspended MMF subscription before the holiday

Copyright Fund China 2008.

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