Multiple bank wealth management subsidiaries send letters to investors: Short-term market fluctuations do not change long-term value

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Reporter Yang Jie

Recently, influenced by multiple factors, the bank wealth management market has undergone a phase adjustment, with the net value of products containing rights coming under short-term pressure. Many bank wealth management subsidiaries, including ICBC Wealth Management, Bank of Communications Wealth Management, Everbright Wealth Management, Xinyin Wealth Management, and Hangzhou Bank Wealth Management, have issued “Letters to Investors” or investment response guidelines.

Overall, the aforementioned institutions generally believe that in the short term, risk appetite may continue to be under pressure, and short-term market volatility may persist. However, in the long term, current domestic policies maintain a positive orientation, with continuous improvement in production, consumption, and investment data, and the long-term logic for a positive market remains unchanged, maintaining strong confidence in the mid- to long-term performance of A-shares. It is essential to take a rational view of short-term fluctuations and adhere to long-term allocation logic.

For instance, ICBC Wealth Management mentioned in its letter that the complexity of the international situation and the sustained high levels of international oil prices exert significant pressure on global market sentiment, exacerbating volatility across major asset classes. However, market fluctuations are normal, and rationality and patience are key forces to navigate through cycles.

Xinyin Wealth Management believes that although the market is influenced by external shocks in the short term, it will experience fluctuations, but this is merely a period of setbacks in a slow bull market, and the market adjustment presents a good opportunity to allocate quality equity assets.

Considering the viewpoints of multiple institutions, short-term market fluctuations are inevitable, but they also give rise to future recovery potential. The resilience of the Chinese economy and the potential for transformation and upgrading support the long-term fundamentals of the market. Investors need to remain rational and not be swayed by short-term market sentiment, appropriately grasping the timing of allocations.

Xue Hongyan, a special researcher at Su Shang Bank, told a Securities Daily reporter that based on the current environment of short-term fluctuations and steadily improving long-term fundamentals in the wealth management market, investors should abandon emotional short-term operations, confront the normalcy of fluctuations, and should not overly panic or blindly follow the crowd to redeem due to declines in the net value of wealth management products. They should align their investments with their own funding timelines and risk tolerance, avoiding the allocation of short-term funds into high-volatility products, prioritizing products that match their risk preferences, maintaining a long-term allocation strategy, and smoothing the impact of phase adjustments through long-term holding and balanced allocation, patiently awaiting market recovery and value return.

In response to recent market fluctuations, the aforementioned institutions are leveraging their professional research and investment capabilities along with suitable products. For example, Xinyin Wealth Management has set strict drawdown control targets for each product line, with several of its series products demonstrating excellent drawdown control and yield resilience during fluctuations, with the maximum series drawdown kept within 100 basis points (BP). ICBC Wealth Management, on the product side, has established a product quality control management mechanism based on “layered drawdown targets.”

It is noteworthy that in a volatile market environment, the allocation value of “Fixed Income +” products is becoming increasingly prominent. The stable returns provided by the “Fixed Income” component, along with the elastic potential contained in the “+” component, will jointly form an upward force, accumulating strength for the next phase of returns.

A person related to Everbright Wealth Management stated that deepening the “Fixed Income +” sector is an inevitable choice to cope with the “low-interest-rate era.” Against the backdrop of potentially declining long-term interest rate centers, the return space offered by pure debt assets is limited. By introducing equity, derivatives, and other diversified assets for “enhancement,” they strive to help investors achieve returns that exceed traditional fixed income while maintaining stability.

In Xue Hongyan’s view, bank wealth management subsidiaries should first establish a solid base of stable fixed income assets, and then refine and optimize the enhancement portion for low volatility: strictly controlling the equity allocation ratio and structure, diversifying into low-volatility auxiliary assets, optimizing portfolio duration, and building dynamic adjustment and risk hedging mechanisms, allowing the “+” to shift from a singular pursuit of yield enhancement to moderate yield enhancement under a premise of stability, while also considering the ability to withstand volatility and alleviating issues such as poor investor experience due to significant drawdowns.

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Editor: Gao Jia