Chinese Mandarin - China authorises first joint venture fund as QDII

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BIZCHINA / News

China authorises first joint venture fund as QDII

(Xinhua)
Updated: 2007-08-02 09:03

China's Harvest Fund Management Co. Ltd. (Harvest), 19.5-percent owned by
Germany's Deutsche Bank AG, has become the first joint venture fund
approved as a qualified domestic institutional investor (QDII) authorized
to invest overseas, and is set to launch its first offshore fund within a
month.

"The specific investment quota is to be decided by the authority, but we
are actively preparing, and the new fund could be ready very soon," said
Hong Qing, associate director of Harvest's marketing department.

The first Harvest QDII fund would focus on common stocks and preference
shares of companies with major operations in China listed in Hong Kong,
Singapore, and New York. The overseas adviser of Harvest was Deutsche
Asset Management, said the company.

Beijing adopted the QDII program last year to broaden investment
alternatives for local investors and encourage capital outflow.

Two Chinese fund management companies, China Southern Fund Management
Co., Ltd. and China Asset Management Co. Ltd. obtained approval last week
after the government expanded the program to include fund management
firms.

Harvest general manager Zhao Xuejun said the program expansion was "a
major reform in financial service, and a strategic movement of the
foreign exchange system reform in China".

"The QDII program allows local investors to put their money in foreign
capital markets, and will alleviate the pressure for further Chinese yuan
appreciation," said Tan Yaling, a research analyst with the Bank of China.

However, some analysts say the demand for QDII products may not be strong
due to the bullish domestic stock markets, and the profits made in
overseas markets may be offset by currency appreciation.

Zhao agreed the appreciation of Chinese yuan brought uncertainty to
overseas investment, but he said, "Diversified global investment can
dilute the risk and guard against market slump, which may hurt badly if
the fund invests heavily in a single market."

Tan said, "Foreign capital markets are more mature and better regulated,
and the long term investment returns in those markets can be quite
satisfactory."

????Last year, Shanghai-based Hua An Fund Management Co. Ltd. became
China's first fund management firm to be allowed to invest overseas as a
pilot QDII, with a quota of 500 million U.S. dollars.

Its first QDII product, launched in November, raised 197 million U.S.
dollars and yielded five percent in the following six months.

(For more biz stories, please visit Industry Updates)

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