China’s fund managers are pondering an investor conundrum. Despite the slump in the country’s stock market – the Shanghai Composite Index is down over 50 per cent on its October 2007 peak – there is little sign of a mass exodus from domestic mutual funds.

According to Z-Ben Advisors, consultants based in Shanghai, while Chinese mutual fund industry assets dropped 20.1 per cent to Rmb2,041bn (£150bn, €189bn, US$298bn) in the second quarter of the year, retail investors held firm, with index and balanced funds retaining the most assets. However, money market funds suffered significant redemptions as investors fled to the safety of bank deposits. Investors also sold out of bond funds, partly to take advantage of new bond fund offerings – an example of the “churning” that is characteristic of the Chinese retail market.