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Finance

Alibaba lowers retail investor ceiling again on money market fund

Move seems to anticipate regulatory concern over systemic risk

SHANGHAI -- China's Alibaba Group Holding on Monday imposed a lower cap on individual holdings in its 1.43 trillion yuan ($214 billion) online money market fund, an apparently voluntary move to restrict flows into a vehicle that regulators worry could destabilize the financial system.

The ceiling for the Yu'e Bao fund's more than 300 million individual investors in China was lowered to 100,000 yuan per person from 250,000 yuan. This follows a reduction in May from 1 million yuan.

Alibaba group member Ant Financial's investment product, described as the world's largest money market fund, lets users of the Alipay payment service park their idle money. The fund's attraction lies partly in the high interest rates holders earn -- an annualized 4% or so, compared with a standard one-year rate of 1.5% on bank time deposits.

Yu'e Bao's assets under management are bigger than those of many Chinese regional banks. Its size, along with the fact that more than 80% of its holdings are deposited with major banks, gives it a systemic significance that regulators can hardly ignore. One cause for concern is the possibility that banks are channeling the funds they raise from Yu'e Bao into real estate loans and other risky investments.

Yu'e Bao's convenient features include instant redemptions. But the fund's investment holdings have an average maturity of more than 70 days, and some banks have turned Yu'e Bao money around into even longer-term loans, financial market watchers say. With Chinese regulators increasing scrutiny of online financial services, Alibaba Group has moved again to restrict the fund's size.

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