Contagion Risk Seen as China Rate Cut Hampers Alibaba Money Fund
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China’s money-market funds are taking more risks to boost returns as the central bank cuts interest rates, prompting Fitch Ratings to warn of the threat of contagion.
Alibaba Group Holding’s Yu’EBao, China’s largest money-market fund, extended its weighted-average maturity to 93 days at the end of last year, doubling from 44 days in September 2013, according to Fitch. Buying longer-dated assets while promising investors instant redemption creates a maturity mismatch that risks infecting the wider financial system, said Fitch analyst Li Huang.