While China's stock market has bounced over 20 percent from the low in August, investors may not shift significant amounts of their money from bonds to stocks, analysts said.
Chinese banks, for instance, have turned more prudent in allocating assets, buying more bonds, Xinhua quoted the banking industry's third quarter financial statements as showing.
Bond prices on interbank market have been dipping since the announcement of Initial Public Offering (IPO) resumption on November 6. However, analysts believe the bond market will improve as interest rates fall. A declining appetite for risk may also add the appeal of bond market.
The purchase of bonds is believed to lower the banks' risk as profit growth tumbles and the ratio of non-performing loan rises.
Guosen Securities believes the bond market will benefit lower rates on the money market as there is room for the open market rates to go down.
Open market rates are still high compared with inflation, the securities firm said.