Chinese School - China AMC plans $1.3b QDII fund in Sept

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BIZCHINA / Center

China AMC plans $1.3b QDII fund in Sept

(Reuters)
Updated: 2007-08-07 15:11

China Asset Management Co Ltd (China AMC)?plans to launch its first
qualified domestic institutional investor (QDII) fund in September to
raise 8 billion to 10 billion yuan ($1.06-$1.32 billion), a source close
to the plan said on Tuesday.

China AMC, the country's largest mutual fund company, is one of four
Chinese fund houses that received government's approval this month to
invest domestic clients' money in overseas financial markets under the
QDII scheme, aimed at encouraging capital outflows and broadening
investment alternatives for local investors.

"The QDII fund we are going to launch next month will mainly buy stocks
listed around the globe," the source, who asked not to be identified,
told Reuters.

The Beijing-based company, whose funds had a combined net asset value of
more than 140 billion yuan at the end of June, has hired US asset manager
T. Towe Price Group Inc as its overseas investment consultant.

Other fund houses that have received approval are China International
Fund Management Co Ltd, which is JPMorgan's China asset management
venture, China Southern Fund Management Co and China's Harvest Fund
Management Co, which is 20 percent-owned by Deutsche Bank AG.

China International said on Monday it aimed to raise $1 billion for its
QDII fund, which will focus its investments on financial markets in Asia,
excluding Japan and Taiwan.

Major Chinese brokerages and more fund houses are still awaiting
regulatory approval to launch such funds to tap China's $2 trillion in
personal savings and improve their product chain. They are joining banks
and insurers that have already ploughed cash into foreign capital markets.

But few analysts expect domestic investors will pile into QDII funds as
long as the domestic stock market remains bullish and expectations remain
unchanged for further sharp appreciation of China's currency, the yuan.

Vincent Chan, head of China research at Credit Suisse, said in an article
on financial magazine Caijing's Web site that Chinese financial firms
were expected to invest a total of $21 billion in overseas financial
markets over the next 12 to 18 months.

About $8 billion is expected to come from fund firms and brokerages, $6
billion from insurers and $7 billion from banks, Chan said.

Most of the funds could mainly target overseas-listed shares of Chinese
firms, but that would have little impact on stock prices given that the
combined market value of the roughly 440 Chinese firms listed in Hong
Kong, Singapore and the United States stood at $2.3 trillion at the end
of June, he said.

The free float portion of overseas-listed Chinese firms was estimated at
around $570 billion, he added.

China AMC also plans to launch a domestic A-share fund later this month
to raise up to 5 billion yuan, the latest in a series of new funds
launched by Chinese fund firms over the past month, the source said.

The A-share fund, which would become the firm's 16th mutual fund product
and its first new fund this year, can invest 60 to 100 percent of its
proceeds in the A-share market, said the source.

The A-share fund, to be named Fuxing, which means "renaissance", would be
closed for redemption in the first year of its operations, the source
added.

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