CICC: Wealth management institutions' asset allocation may exhibit strong pro-cyclical characteristics; need to wait for right-side opportunities.

CICC released a research report stating that investors have recently been paying closer attention to the institutional behavior characteristics of absolute-return funds such as wealth management products, insurance, and fixed income plus. Third-quarter wealth management scale performance slightly exceeded expectations. From a product structure perspective, supported by bond market performance and with the pressure of smooth valuation rectification slightly easing, low-volatility fixed income products continued steady growth, while the scale of equity-mixed wealth management products rose slightly. Public funds' positions in major asset allocation reached a new high, with bond and deposit positions remaining stable. The bank expects wealth management institutions may exhibit strong pro-cyclical characteristics, that is, tending to seize right-side opportunities during stock market rallies, but with limited room to add positions in declining and range-bound environments. CICC's main views are as follows: The China Banking Wealth Management Registration and Custody Center released the third-quarter wealth management report. Meanwhile, with the equity market recently under pressure, investors have been paying closer attention to the institutional behavior characteristics of absolute-return funds such as wealth management products, insurance, and fixed income plus. The bank believes that wealth management products have a strong desire to control positions and stop losses amid asset declines; at this stage, the liability maturity structure of wealth management products remains short, and the risk appetite of wealth management clients remains low. The bank observed that since September, wealth management institutions' exposure to stocks and equity-containing funds has generally shown a downward trend. The bank expects that short-term pure fixed income products may remain the main driver of wealth management growth; although leading wealth management institutions are actively expanding multi-asset allocation, product growth needs support from the market environment. Third-quarter wealth management scale performance slightly exceeded expectations. At the end of 3Q26, wealth management scale was RMB 35.4 trillion, with cumulative growth of RMB 1.7 trillion in the third quarter and a quarter-on-quarter growth rate of 5.1%, stronger than typical seasonal patterns. The bank believes that deposit migration and reduced demand for quarter-end bank deposit window dressing drove the rapid growth of wealth management scale. From a product structure perspective, supported by bond market performance and with the pressure of smooth valuation rectification slightly easing, low-volatility fixed income products continued steady growth, while the scale of equity-mixed wealth management products rose slightly: at the end of 3Q26, the scale of fixed income, cash, mixed, and equity products was RMB 27.5, 6.7, 1.1, and 0.1 trillion, respectively, accounting for 77.7%, 18.9%, 3.0%, and 0.3%. Major asset allocation: Public fund positions reached a new high, with bond and deposit positions remaining stable. At the end of 3Q26, wealth management allocations to bonds, interbank certificates of deposit, and interbank deposits were 41.0%, 9.3%, and 28.2%, down 0.5pct and up 0.7pct quarter-on-quarter, respectively; in the third quarter, wealth management net increased bond holdings by RMB 0.42 trillion, with additions mainly in corporate bonds and bank tier-2 perpetual bonds. Allocation to interbank deposits remained at a high level of 28.2%, with positions once rising to 30% in July-August. In addition, at the end of 3Q26, wealth management allocations to public funds hit a new high of 7.9%, with allocation scale reaching RMB 2.96 trillion. The bank expects wealth management mainly increased allocations to pure bond fund products; during the same period, the stock market declined, leading wealth management institutions to reduce allocations to equity, mixed, and fixed income plus funds in September-October. Equity assets were reduced, and right-side opportunities need to be awaited. The bank estimates that at the end of 3Q26, wealth management products held a total of RMB 0.6 trillion in stock assets (direct investment plus indirect investment through public funds), accounting for 1.5% of total wealth management assets, still at a relatively low level. In March and July this year, during stock market declines, wealth management products controlled drawdowns by reducing positions. However, this year wealth management fixed income plus product issuance was strong, partially offsetting position reductions in existing products. Looking ahead, the bank expects wealth management institutions may exhibit strong pro-cyclical characteristics, that is, tending to seize right-side opportunities during stock market rallies, but with limited room to add positions in declining and range-bound environments. Risks Pressure from smooth valuation rectification exceeds expectations; significant fluctuations in the bond and stock markets bring net value adjustments.