Liquidity shortage creates opportunities

SHANGHAI - Depositors who have invested in financial products may be able to make a fortune soon, as bank managers are not pleased with a recent liquidity shortage.

The Shanghai Interbank Offered Rate (SHIBOR) overnight rate, a basic gauge of interbank borrowing costs, has been rising since the beginning of the month, hitting a record high of 13.44 percent on Thursday.

The expected return of financial products increased following the surge, which attracted more investment in financing considering the relatively lower interest rate for deposits.

Fang Rui, a researcher at Cnbenefit, a service platform for the Chinese financing market, said the average expected return rate has risen significantly recently, reaching 4.56 percent for products with a term of one to three months from 3.93 percent in the first week of May.

"The short-term capital rate surge pulled up the return and banks lifted the pricing for financial products to attract more capital in order to fend off tightened liquidity," Fang said.

Statistics indicate that the expected return for many financial products has already exceeded 5 percent, while the deposit rate set by the central bank is 3 percent.

A financial analyst in Shanghai who requested anonymity predicted that the overall return will fall after liquidity is eased at the beginning of July, adding that investors should seize the opportunity to choose financial products with longer terms for more benefit.

Based on data from Cnbenefit, the value of financial products issued by commercial banks in 2012 totalled 24.71 trillion yuan ($4.01 trillion), up 45.44 percent year on year.

However, some wealth management capital worth trillions of yuan was injected into trust plans or credit assets with higher risk, which resulted in the China Banking Regulatory Commission creating strict restrictions in March.

Senior investor Li Chunyan said individual investors have a weaker risk tolerance and should be more rational when choosing financial products.