Recently, a large number of banks have suddenly decided not to play the game of wealth management products anymore! Unexpectedly, some wealth management products that had not yet expired, the bank actually said in advance that they would not play, and directly removed these products from the shelves. This is a small earthquake for investors. But what is the reason behind this?
Imagine that you invest in a bank's wealth management product, and you thought you could collect interest steadily, but suddenly one day, the bank tells you, "I'm sorry, we're going to close this product." You might be thinking, what's going on?
In June this year, more than 20 wealth management products were terminated early by major banks. Most of these products are issued by bank subsidiaries and are meant to attract and retain customer funds.
So why are banks doing this? First of all, we need to understand where the bank's wealth management products are mainly invested. In general, these products invest in more stable financial instruments such as time deposits, certificates of deposit and bonds.
The benefit of these investments is that the risk is relatively low, but the problem is that if the market interest rate falls, the yield of these products will also decrease.
In fact, that's exactly what is happening now. Recently, the global financial market has been experiencing a wave of interest rate cuts. For example, on 6 June, the ECB announced a 25bp rate cut, marking the first rate cut in nearly five years, and also revealed plans for another possible rate cut before the end of the year.
Domestically, the situation is similar. As global and domestic economic growth slows, small and medium-sized banks have had to cut deposit rates to reduce costs in order to stay afloat. Nowadays, it is becoming more and more difficult to find a fixed deposit product above 3%.
In this environment, it is difficult for wealth management products issued by banks to maintain high yields. If banks continue to maintain high-yield wealth management products.
Then the risk is greatly increased because they have to achieve this through higher risk investments, which is not advisable for banks. As a result, banks have opted for a relatively safe strategy: early termination of wealth management products that may pose risks.
While this approach can protect the bank's own interests to a certain extent, it is bad news for investors. Many investors choose bank wealth management products because of their relative safety.
Now that the product was abruptly terminated, they had to reconsider their investment direction, and the uncertainty and possible losses in the middle made many people uneasy.
More importantly, it reflects some of the current problems in the global and domestic economy. Judging by the latest financial data, the growth rate of broad money (M2) has reached a record low, while the growth rate of narrow money (M1) has even been negative.
This shows that whether it is enterprises or individuals, everyone's willingness to borrow and invest is weakening. This is bad news for the economy, as it could mean that economic activity is slowing.
In order to stimulate the economy, the central bank is likely to continue to lower lending rates in an attempt to encourage businesses and individuals to increase investment and consumption through lower borrowing costs.
However, such a policy also has its side effects, such as leading people to prefer to keep their money in the bank rather than invest or spend, which has already happened in Japan and is known as "deposit Japanization".
The entire financial market is undergoing a profound transformation. The early termination of wealth management products by banks is only the tip of the iceberg, and behind it is the slowdown in global economic growth as a whole.
For investors, this has increased the uncertainty of investment, and many people have begun to reconsider their investment strategies and look for more secure or potentially higher returns.