(Yicai) May 10 -- China’s wealth management product market expanded by around CNY2 trillion (USD276.8 billion) in April from the previous month, thanks to the boost from Chinese banks’ increase of interest rates on deposits.

The country’s WMP sector reached a size of CNY28.63 trillion (USD3.96 trillion) as of the end of last month, statistics from the department of research of Citic Securities showed.

The main reasons for the increase in the size of Chinese lenders’ WMPs are the facts that sustained and significant returns on WMPs attracted many investors, the deposit interest rate cut is gradually taking effect, and funds flooded to WMPs after lenders restricted interest subsidies, said Ming Ming, chief economist at Citic Securities.

There are not many high-interest deposit products this year, so funds are mainly flowing to WMPs from deposits, according to Wang Yifeng, a banking industry analyst at Everbright Securities.

The interest rates on three- and five-year deposits are below 2.5 percent, while those on one-year deposits are under 2 percent, Yicai found. Meanwhile, the benchmark yield on 2,523 new WMPs was 3.05 percent on average as of April 30, according to data from third-party statistics provider Pystandard.

The average annual yield on closed-end fixed-income WMPs in the Chinese market was 4.08 percent on average in April, 4.39 percent in the past three months, 4.52 percent in the past six months, and 3.96 percent in the past year, Yicai calculated.

Many investors are still worried about recent fluctuations in WMPs’ net value. An investor told Yicai that the net value of WMPs they bought for CNY200,000 (USD27,680) unexpectedly dropped for five trading days, resulting in a loss of over CNY100 (USD14) a day.

But industry insiders believe such drop is normal, especially after the rapid rise at the beginning of the year. Investors do not need to worry, the head of the financial market department of a joint-stock bank told Yicai.

The Chinese WMP market value will remain around CNY28 trillion next month, and even in case of a great decline for seasonal reasons, it will likely grow to over CNY30 trillion in the second half of the year, Ming predicted.

Editor: Futura Costaglione