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Fewer funds issued in China in 2012

01-11-2012 14:31 BJT

Given the dismal performance of Chinese stocks last year, fund managers are more tentative about offering new products this year. So far, just two new funds have come onto the market. Laura Luo takes a closer look at the current situation for the nation’s fund managers.

Only two funds have opened this year so far. That’s in sharp contrast to last year, when 15 funds came onto the market in the first week. Analysts say the reluctance comes from the dismal performance of mainland funds last year.

Chen Lin, researcher of Wealth Management Company, said, "2011 was a bad year for fund investors. The average return for open-end funds was negative 25 percent. This under performance exceeded the drop of Shanghai Shenzhen CSI 300 index."

An investor said, "One of the funds I invested in lost nearly 20 percent. So I will wait and see if I invest in funds in this year."

Another reason for the bleak outlook of investment funds is weak distribution channels. China’s commercial banks are the main underwriters of investment funds, but they’ve focused their attention on selling short-term fixed-income wealth management products, rather than promoting funds.

Besides a lackluster A-share market, and sluggish sales force, Chinese investment funds have generally found it hard to raise money in the first issuance. Last year, the average amount raised for all of China’s funds stood at just 1.3 billion yuan, or about 200 thousand US dollars.

And over half of China’s funds hold less than 1 billion yuan in market value. Moreover, Chinese law requires that funds invest at least 60 percent of money raised from investors back into the markets. That makes the hit harder in bearish markets.

Liu Jingxin, an analyst, said, "The law requires that under no circumstances the fund position be below 60 percent. We also hope there will be some changes to regulations, but funds should also improve their profit making abilities."

However, fund managers are optimistic about markets in 2012. They expect shares to continue falling in first quarter, but rise after that.

 

Editor:Zhang Dan |Source: CNTV.CN

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