GUANGZHOU (Fund China) - Today is the last trading day in 2007, standing on the threshold of 2008,despite the uncertainties still exist, the majority of institutions still strongly looking forward to the China’s economy and stock market prosperous prospects.

The continual prosperity of the stock market will provide a more relaxed environment for funds,especially for the equity funds.The first choice in funds for gaining a high yield next year is still the equity funds, but experts suggest that the investors should anticipate the equity funds rationally and optimize funds from three aspects: a long-term trend, timingability and liquidity risk control.

According to SINOLINK Securities Co. the equity funds issues are closely linked to the stock market movement. In the past two years, The fund quarter average issuing scale and the Shanghai composite Index movement in the same quarter‘s correlation coefficient reaches a 0.7.

On the other hand, the fund will be offered with a necessary market room for the scale growht by the A share market scale enhanced due to the release on the restricted stocks and the new share issue. Furthermore, the domestic fund mareket is in a developping stage.Acclimating the market development and enhancing the fund scale are the two main principles for most of the fund managements’ development. So the equity fund is still a majority of fund management’s best choice. Therefor, the total size of the fund is expected to upward 4 trillion yuan with a main force of the equity funds.

From the latest five years’ performance, the equity open-end fund gained a higher-than-expected comparably stable imcome( the average relative yield is 10% more or less) whether bullish or bearish and it is better than the market proceeds. The fund management earns an admire in its long-term investment ability.

Moreover, if taking the proportion of the fund holding in stock into consideration, the ability of manipulation is really outstanding. Therefore, the prosperity of the stock market is expected to continue, the equity fund is still a hot earning machine.

However, ZhangJianhui, the chief fund analysts of SINOLINK Securities Co. reminded that te high-yield in the last two years had a profoundly influence. The investors should keep a sober and rational mind when speculation. The some double Net-value gains is not normal, not a myth neither. The fund investment also includs a risk. And the risk will be eclipsed strongly in a invest porfolio or a enhanced equity fund, that is why when gaining a high yield, the funds only shows a low risk.

Pay attendtion to the long-term tread of the top-holding share

Fund as a portfolio investment variety, whether managers’ comprehensive capacity or product design advantages volatilization needs a certain period of time for its growth. Thus, optimizing a comprehensive and comparative advantages Fund becomes a eternal investors topic. Zhangjianhui thought that, the simple but effective strategy is selecting the industry borad having a clearly long-term movement trend for its relatively stable earning exluding thinking of the relative returns in the”complicated” borad.

Based on economic growth and structural transition, Zhang Jian Hui said the financial, real estate, and coal resources within pricing rights or the demostic demand-consume sevice industries like the food, drink, auto, medicine, retail business, hotel, tour media,etc., These industry board’s long-tern trend is clear comparablely. It is better for the investors to select the above fund varieties emphasizing in the long-term trend and the continual top-holding.

Chose the fund with outstanding forecast

In addition, stock election and outstanding forcase are the two main factors effecting the excess income gaining. It is difficult to make a choice in the individual shares,and the apperception of the stock index influence or the forecast may become a significant factor effecting different funds’ yield.

So investors need to know better of what kind of stock the fund invests and the fund ability to timing, and a further understanding of the fund management company, then chose from the outstanding optimum timing ability fund products and fund management companies.

Rapid expansion in the fund scale, as at the end of the third quarter of 2007, equity funds’ average outflow asset has exceeded 100 billion yuan, and more than 100 equity funds’ outflow asset is above 10 billion yuan.

As in the proportion of the investment and constractual investment, there exist many constraints, the scale of the fund management industry as well as the scale of single Fund and the fund management company’s total assets rapidly expands leading to a high requirement in the fund capital liquidity (especially in the top-investing asset)

Meanwhile, frequent purchase / redemption increased the invest management difficulty for the fund managers, as well as for the fund capital liquidity. The liquidity risk is becoming a un-neglacted factor when selecting funds for the investors.

The SINOLINK Securities Co.said there are two sides for analysing the top-holding funds’ liquidity. First, from the avearge turnover rate, compare the active degree in transation quarterly; second, from the potential loss, compare the max loss degree in the lowest-price sale quarterly.

The “plane& dot” porfolio

Throughout 2007 the IPO purchase of all fastigium periods when the market is up all the way, totally and the equity fund yield is high, the people are all running for the equity fund; and when the market is bearish and the bond fund’s yield becoms great, the investors then follow the bond fund’s tide. Index funds,money market funds have been under such a speculation more than one round back. The outcome is that when investors know that the certain types of funds can make money, they has already missed the chance.

ABN Amro TEDA Fund Management Co. advised for the “plane&dot” porfolio, so that the investors will not miss any earning opportunity of any fund. The “plane&dot”porfolio is divideing the invest capital into two parts, the plane part and the dot part. The “plane” part is the main role taking more than 60% of the total asset. And this part is for a long standing earning speculating in the stable and reliable funds; while the “dot” part is for a short term investment, purchasing the hot fund timely and following the main trend in the market. It will gain a un-expected yield in the bullish trend.

Specifically, every person has a long-term and a short-term planning in his life, long-term planning such as the accumulation of pension funds, the education fund for their children; the short-term planning can be buying a car, travelling and so on. According to the “plane&dot” , the long-term investment can be speculating in the stable and reliable “plane” fund, and the short-term plan can be achieved by the “dot” fund investment.

The investors should note that asset allocation is not a done once and for ever issue, it should be a dynamic adjustment. That is because the economic circling and the fund’s own invest stragtegy and style may chang at any time. Therefor, the investors had better inspect the asset porfolio every quarter, adjust the porfolio as the market adjusts when needed.

Copyright Fund China 2008.

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