A growing number of bond funds in China have suspended taking subscriptions or caps on inflows, amid signs that money is gushing into fixed income products as stocks wobble and banks cut deposit rates.
On Friday, more than a dozen bond funds announced measures to restrict new purchases, according to fund managers' filings.
According to the Chinese newspaper China Fund, around 40 short-term bond funds made similar statements in the past 20 trading days.
Bond funds look increasingly attractive for investors at a time when banks are lowering deposit rates, according to Xia Haojie, bond analyst at Guosen Futures.
The top five state lenders cut individual deposit rates last week, which could lead to a reduction in lending rates to help the economy. The rate cuts came on top of the reductions in deposit rates in April.
A bond fund manager who declined to be named attributed to the flight to bonds to a bearish stock market, and a tendency to seek shelter ahead of the week-long Chinese National Day holiday that starts on October 1, the flight to bonds was blamed for the bearish stock market and the tendency to seek shelter ahead of the week-long Chinese National Day holiday.
China's blue-chip index CSI 300 has fallen more than 20 per cent this year because of the gloomy economic prospects.
Huatai-PineBridge Fund Management said in a statement that it would suspend accepting fresh subscriptions.
The latest data shows that Chinese bond funds have seen their assets under management AUM jump 18 per cent during the first seven months of the year, to 4.8 trillion yuan.
AUM of equity funds and balanced funds, which invest in both stocks and bonds, dropped 7 per cent and 14 per cent during the same period.
China may need to reduce the banks' required reserve ratio RRR in the fourth quarter to keep liquidity adequate, according to the official China Securities Journal on Saturday.