Yu’E Bao Draws Chinese Investors as They Seek to Beat Inflation

Yu’E Bao Draws Chinese Investors as They Seek to Beat Inflation

Yu’E Bao, an investment product offered through Alibaba Group Holding Ltd.’s third-party payment affiliate Alipay.com Co., has attracted more than 100 billion yuan ($16.4 billion) as Chinese investors seek returns that beat inflation. Users of Yu’E Bao, created by Beijing-based Tian Hong Asset Management Co., jumped 12 times to 30 million by Nov. 14 from the end of June. The scale of the product jumped almost 18 times to 100 billion yuan from 5.7 billion yuan, Tian Hong said in an e-mail.Alibaba Group, China’s largest e-commerce business, is pushing into finance as households trapped between savings that lag behind inflation and risky investments seek alternatives with better returns, said Wang Weidong, an analyst at Shanghai-based Internet consultant IResearch. Chinese consumer prices rose 3.2 percent in October, an eight-month high.

“The investment returns are pretty high compared with other products,” Wang said. “Also, users who already have a habit of using Alipay will be less hesitant to use it due to the convenience, and have an existing trust of the brand.”

Alipay began offering Yu’E Bao, which translates to “leftover treasure,” in June. Alipay users can put their money into the product, which invests in funds. There’s no minimum amount, and customers can withdraw their cash anytime.

Zhejiang Alibaba E-commerce Co., the parent of Alipay, announced in October it would pay 1.18 billion yuan to buy control of Tian Hong to ensure the safety of investments in Yu’E Bao, Lucy Peng, chief executive officer of Alibaba Small & Micro Financial Services Group, said at the time.

Alipay Structure

Alipay will also offer new fund products from third parties, Peng said, declining to identify them.

Alibaba Small & Micro Financial Services Group is being restructured, and its shareholder information will be disclosed “soon,” Peng said. She said the group is registered in China using the name Zhejiang Alibaba E-commerce Co. and declined to elaborate.

The financial group plans to offer a 60 percent stake to strategic investors, according to a statement on its Sina Weibo official account.

Alibaba Small & Micro Financial Services Group contained two loan companies as of July, as well as Alipay, which has more than 800 million registered accounts.

Alibaba’s financial arm also offers a cloud computing service, known as Ju Baopen, to finance companies. It works with five banks and has signed cooperation deals with another 20, said Yuan Leiming, a general manager at Alibaba Small & Micro Financial Services Group, during an conference in October.

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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