September fund market performance

The Chinese government's intention to balance liquidity and stock prices in the domestic market is clear.

Initial public offerings (IPOs) and the launch of Qualified Domestic Institutional Investor (QDII) funds have accelerated, with four QDII funds beginning business in recent months, raising a combined $16 billion.

The China fund market thus entered the age of investing abroad.

In a stark contrast, no new funds investing in the domestic market were allowed since September 5.

It is obvious that the government intends to push excess liquidity to global markets. At the same time, with the issuance of large-capitalization stocks such as Construction Bank and China Shenhua, the financing size of IPOs reached $200 billion, an historic record. These two measures show the effects of balancing demand and supply in the market. With the large increases in the surrounding markets, the increase in A shares fell.

Open-end fund performance

All China open-end fund categories recorded gains in September, but returns shrank. The mixed-asset aggressive, mixed-asset flexible, equity, and mixed-asset balanced fund categories chalked up 5.74 percent, 5.21 percent, 5.15 percent, and 4.91 percent gains, respectively.

According to Lipper statistics, within the equity and mixed-asset aggressive categories only two funds outperformed the Shanghai and Shenzhen 300 index.

QFII fund performance

The 13 QFII funds in Lipper statistics earned in September an average of 5.25 percent, calculated in renminbi- almost the same as their domestic counterparts. The latest total asset under management of QFII funds was $7.9 billion. Considering the earnings influence, redemptions were a little more than subscriptions. The net redemption was about $140 million.

Closed-end fund performance

The Shanghai closed-end fund index decreased 2.45 percent in September after 13 months of consecutive increases. Compared to the 5.36 percent increase of the Shanghai and Shenzhen 300 index the cautious attitude of closed-end fund investors was obvious. The discount rate of funds over 2 billion units expanded significantly to 32.50 percent.

Lipper

(China Daily 10/22/2007 page4)