China ’s mutual fund industry saw tremendous growth in 2007 as investors strove to take advantage of the soaring stock market, according to China Securities Journal.

China ’s stock market jumped 97% in 2007, despite an 18% drop in November for a key index.

“People are willing to invest their money, and they've been keen to shift from the low-return bank deposits to mutual funds where experts handle their funds,” said Yi Linming, an analyst with Industrial Securities.

By the end of 2007, net assets of China ’s 363 mutual funds totaled about $453 billion, up from $117.6 billion a year earlier, according to data from Galaxy Securities.

Chinese investors have been eager to profit from the booming stock market, converting bank deposits into mutual funds. Analysts predict the approximately 16 trillion yuan, or $2.2 trillion, held in Chinese bank deposits have the potential to fuel further growth in the mutual fund industry.

A survey last year found that 83% of Chinese respondents said mutual funds are the first choice for wealth management purposes.

“Once they realize investing in mutual funds is more profitable and less risky than buying individual stocks by themselves, they just swarm to funds. It's the herd instinct,” Yi said.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.