Yu'E Bao warned on paperwork

Yu'E Bao, China's first fund investment platform for online shoppers, has been warned by the nation's securities watchdog that it lacks the necessary documents, its operator Alipay, a third-party online payment service under domestic e-commerce leader Alibaba, said on Sunday.

The China Securities Regulatory Commission (CSRC) sent a statement to Alipay Friday, claiming that the company had failed to file all the required settlement accounts for fund sales and urging the company to complete the procedures as quickly as possible.

"We now have special staff responsible for the filing," Zhu Jian, senior manager of the public relations department of Alipay, told the Global Times Sunday. Zhu did not detail the progress of the filing, but said the new investment channel is still operating smoothly.

Yu'E Bao came online on June 13 and within six days had attracted 1 million of Alipay's 800 million users to invest directly in a money market fund. The fund, called Zenglibao, is offered by Tianjin-based Tianhong Asset Management Co and has a minimum investment of 1 yuan ($0.16) with no maximum limit.

The CSRC's statement may lead some withdraw their investments, but many people are still optimistic about Yu'E Bao's prospects, a Tianhong PR representative told the Global Times Sunday on condition of anonymity.

Zenglibao's weekly average for annual compound rate of return had reached 5.32 percent by Sunday, compared with 3.981 percent by June 16 and higher than the current one-year fixed deposit rate of 3.25 percent, according to data provided by Tianhong.

However, analysts said that potential risks should not be ignored despite the high profit figure.

Losses can occur in any investment product, and investment products targeted to online shoppers may come with more risks, since the country's mechanism for risk management of Internet finance still has a good deal of room for improvement, said Wang Weidong, an industry analyst with iResearch.

Some analysts also noted that the net assets of Zengli­bao should be another source of concern for online shoppers as they may be artificially inflated.

Domestic private fund firms are likely to ask for capital from banks and securities traders to scale up their newly issued funds so as to attract investors quickly. And if the capital is withdrawn, the rate of return will be negatively affected, Dai Weigao, a Beijing-based financial service researcher, told the Global Times Sunday.

Zenglibao may carry such risks and it is hard for ordinary people to know when to withdraw their investments, he added.

The Chinese laws for fund investment stipulate that the net assets of newly issued funds should not be less than 200 million yuan.

Tianhong has collected 201 million yuan for Zenglibao within a day through real sales, said the Tianhong PR representative.