(Yicai) Aug. 6 -- Riding recent regulatory changes that elevated their investor status in the Chinese mainland and amid lower yields on fixed income, banks’ wealth management units are increasingly turning to initial public offerings in the search for better returns.

Among Chinese banks’ wealth management arms, Bank of Ningbo’s had subscribed to the most number of IPOs as of July 25. BNB Wealth Management recently said it has invested in several listings of companies going public in Shanghai and Shenzhen.

Their sudden interest in IPOs stems mainly from a regulatory change in March that granted them the same A-class IPO investor status as mutual funds, affording them the highest allocation priority and subscription quotas, industry sources told Yicai.

This change has given them the opportunity to invest directly in IPOs, which they rarely had the chance to do because of their previously lower investor status, one of the insiders pointed out.

China’s “moderately loose” monetary policy has also taken the shine off fixed income investments such as treasury bills and high-grade credit bonds, while other regulatory changes have greatly reduced the risk of newly listed shares falling below their issue price, said Xue Hongyan, special researcher at Jiangsu Su Merchants Bank.

According to data from Wind Information, the new stocks listed on Chinese mainland bourses in the first half of this year averaged a 219 percent gain on their first trading day, and only one fell below its issue price. No debut stock on the tech-heavy Star Market in Shanghai or ChiNext in Shenzhen fell below its issue price.

“Direct participation in new share subscriptions by bank wealth management units opens up a new path to boost yields on wealth products,” Dong Ximiao, chief researcher at Merchants Union Consumer Finance, told Yicai.

Direct IPO investment allows wealth managers to fully exploit price differentials between the primary and secondary markets, bringing substantial investment returns, he added.

Dong said bank’s wealth products have long relied heavily on fixed income investments, but after obtaining A-class investor status their wealth arms can optimize product asset structure and boost their units’ competitiveness in the asset management industry.

Still, Dong cautioned that because investors in wealth products still prefer low risk and it will take time for these subsidiaries to develop IPO expertise, the shift toward more equity in their portfolios will be gradual.

Editors: Tang Shihua, Futura Costaglione