At least one equity fund will hit the market after the week-long Spring Festival, which starts on Sunday, with four more to follow early next month, company statements and sources said yesterday.

Chinese securities authorities halted sales of mutual funds in late November to keep the market from overheating after stock values on the Shanghai and Shenzhen exchanges more than doubled since the start of 2006.

But the markets have been buffered by heavy selling since early this month, and regulators now believe fresh capital is needed to sustain a healthy upside, the sources said.

The Shanghai Composite Index soared 130 percent last year and extended the rally with a 10 percent rise in January before the correction set in, erasing this year's gain.

The stock gauge picked up again this week to its January level on optimism over the new supply of funds.

"The watchdog is worried that a boom could quickly fade if investors feel regulatory support is not there," said a source close to the stock regulator. "Allowing mutual funds in at the moment is regarded as a good way to re-ignite market sentiment."

Among the to-be-issued funds, a product managed by CCB Principal Asset Management Co will begin marketing on February 26, set to be the first mutual fund to be launched on China's mainland in three months.

The fund management firm, held by China Construction Bank and America's Principal Financial Group Inc, plans to cap the initial size of the equity fund at 10 billion yuan (US$1.29 billion), it said in a statement.

Other fund firms set to sell new equity funds include China Universal Asset Management Co, Zhonghai Fund Management Co, Huafu Fund Management Co and State Cinda Fund Management Co, separate statements and company officials said.

State Cinda, a joint venture between Commonwealth Bank of Australia and China Cinda Asset Management Corp, will start selling its first fund in early March, sources said.

Cinda will thus become the first of China's four State-owned bad-asset managers to run a mutual fund.

Earlier media reports have said the resumption of new equity funds will likely bring in at least 30 billion yuan to the market next month.

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