Mainland China A-shares fell sharply last year but mutual fund assets in the country continued to expand even if at a slower rate than in 2017, figures show.

China’s mutual fund assets continued to surge in 2018, at a rate of 11.7 per cent to RMB12.9 trillion ($1.9 trillion). Exchange-traded fund assets grew at a faster rate of 53.4 per cent to reach RMB707.6 billion, according to figures from analytics firm Cerulli Associates.

The report gave a bullish view of the market even though growth in China’s mutual fund assets under management was less than half the 30.4 per cent increase in 2017.

Net new inflows amounted to RMB1.4 trillion during the same period, the organisation said in a report.

Money market funds remained the most-favoured products, attracting RMB806.3 billion in inflows. However, compared to 2017, when MMFs attracted almost all fund inflows, both bond and equity funds saw bulk inflows in 2018, at RMB623.4 billion and RMB80.5 billion, respectively. Meanwhile, ETFs, excluding money market ETFs, attracted the most inflows in the past seven years, at RMB190.2 billion.

Cerulli said the inflow and AuM growth figures were notable considering how Chinese equities suffered late last year. China A shares fell more than 20 per cent in 2018. Many investors, both institutions and individuals, rushed to fixed-income assets.

Besides traditional bond funds, short-term bond and bond index funds were also ui said.favored by investors seeking stable returns and low cost. On the other hand, some investors and managers saw the falling stock market as an opportunity to seize undervalued stocks. This brought bulk inflows into ETFs, equity funds, and convertible bond funds, especially as the stock market showed signs of recovery in the beginning of 2019.

“Passive products have never gained as much traction as they did in 2018 and 2019 to date, thanks to market movements and managers’ consistent efforts to educate investors on these products, especially after the market turbulence in 2015,” Miao Hui, a senior analyst with Cerulli, who leads the China research initiative, said.

“However, it may be too early to tell whether they are becoming mainstay products, because many investors seem to like trading in ETFs, rather than investing in them for the long term," Hui added.