Although the Central Bank is urging support for yuan stability, and market watchers say they are confident that the regulators are taking the necessary steps to control the situation, affluent Chinese are still looking for more options to make investments offshore and reduce risks to their savings.
Zhong Hongjun has some 3 million yuan in investments, mainly shares of companies listed in China and abroad. Despite being a professor at a finance and economics university in Shanghai, Zhong still feels the need for help from professional finance services when it comes to investing outside the country.
"What we need now is professional financial service providers to give us good investment options, to help us to pick out and weigh good asset categories and investment opportunities offshore," Zhang said.
The need for investors like Zhong to look for more options abroad has grown with fluctuations in the RMB's value and the growing volatility of stock markets in the Chinese Mainland.
The RMB lost nearly 6 percent against the US dollar last year, and it went on to lose a further 1.5 percent in the first week of this year. The Shanghai Composite Index saw its value plunge by more than ten percent last week.
"There is no free lunch, if you are going to want more in terms of expected returns, you have to take on more risk, but there is one exception to that rule, and that is with diversification that when you spread out across more stocks, more bonds, more countries, more asset classes, you get the benefits of reduced risk without any cost in terms of expected return if you design your portfolio properly," Randolph Cohen, Finance professor with MIT Sloan School of Management, said.
Demands for overseas investment grew quickly last year. Many went into funds run by financial institutions taking advantage of the so-called qualified domestic investor program, which has a 90-billion dollar quota allowing them to invest in offshore markets. That quota was almost entirely used up by financial institutions last year.
Some funds had to stop selling since they could get no additional quota. Industry insiders say that investments in offshore markets which don't correlate with the performance of China's markets can help investors hedge risks.
"We see that advanced economy is at different stages of economic cycle, so that's why we recommend maybe Euro area equities but with Euro hedge because due to the strength of the US dollar. Deflationary pressure to abate in development market so the recommendation is maybe you can have a chance in US high yield bonds," David Leung, managing Director of Standard Chartered Bank (China) Ltd., said.
China's middle class investors present great opportunities for financial institutions and offshore markets.
Forbes China magazine says that by the end of last year, the country had more than 15 million people holding 114 trillion yuan in total financial assets, now growing at nearly 8 percent annually.
