Profit, loss not mutually exclusive to funds
By Zhang Yu (China Daily)
Updated: 2007-03-02 10:41

Ripples of the Shanghai stock exchange slump are still being felt across the world. But they don't seem to have affected China's mutual fund market. Just a day before Tuesday's slump, thousands queued before 16 outlets to buy 10 billion yuan ($1.29 billion) worth of CCB Principal Asset Management Co shares in just one hour.

The first mutual fund to be issued after Spring Festival created a selling speed record for open-end funds. Harvest Fund Management Co held the earlier record for attracting 41.9 billion yuan ($5.41 billion) the largest fund in China in a day on December 7 last year. CCB Principal's lightning selling speed is not a one-time exception, for a mutual fund mania has been sweeping the country since mid-2006, when the stock market started its bullish run.

In fact, mutual fund investment was one of the hottest topics at family and friends' gatherings during the lunar New Year holidays. "Have you invested in mutual funds?" seemed to be a common question at such get-togethers.

Profit, loss not mutually exclusive to funds
Books on mutual fund investment are selling like hot cake at bookstores in major cities. [China Daily]

Because of the bullish run, which more than doubled the stocks value, over 90 percent of the 187 open-end funds made a profit last year. Some of them even doubled their net asset value from their issuing price of 1 yuan (12 US cents) to more than 2 yuan (24 US cents). Market analysts are unanimous about the majority of fund investors making money.

The mania has prompted millions of stock investors and bank depositors to turn to mutual funds, with the total number of investors being about 15 million. And not surprisingly, almost half of them (7 million) were added to the list in the last two years. In contrast, only 4.5 million Chinese became new A-share investors in 2005 and 2006.

Huge amounts poured into the funds' market, increasing their assets from 475 billion yuan ($61.37 billion) in 2005 to 900 billion yuan ($116.28 billion) last year. According to the latest figures, the combined assets of the 324 funds were close to 1 trillion yuan ($129.20 billion) on February 9.

Before the mania gripped individual investors, the total value of a mutual fund was up to 10 billion yuan ($1.23 billion). But after Harvest's mega debut, seven new funds have crossed that figure, creating worries for securities regulators. The regulators suspended approvals for new funds temporarily, and since then have given the go-ahead only to CCB Principal. More than 20 are awaiting approval. Market sources say CCB Principal got the green light because it agreed to limit its fund size to 10 billion yuan.

"It's weird to set a ceiling for open-end funds, for they don't have a fixed size. Instead, they fluctuate according to market conditions," says Li Wei, ICBC Credit Suisse Asset Management Co's sales and marketing director. "The 10-billion-yuan limit could soon be applied to four or five new funds that could enter the market in the near future."

Last year was a golden period for mutual funds, says Marketing Assistant General Manager of Tianhong Asset Management Co Zhang Libin. "That happens once in 10 years or so, when no matter which fund you invest in, you have a chance of making profit."

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