Fund China

GUANGZHOU (Fund China) - QDII outperform the A-shares for continuous 3 months, but the new product was disesteemed.

QDII Fund, which was “universal condemnation”, begin to recover when fell to the vicinity of 0.6 yuan, and they have outperformed the A-share fund for three consecutive months unconsciously.

However, recovery whether can renew people’s enthusiasm or not? Fortune SGAM overseas and Yinhua global core equity funds’s launches get cold treat and large-scale redemption in the rumours, which as if tell us a different story.

Outperform the A-share fund for three consecutive months

According to statistical information of Wind，Hang Seng index rose 12.72 percent in April, in the U.S market, Dow Jones Industrial Average Index and Standard&Poor’s 500 index rose 4.54 percent and 4.75 percent, QDII invested in the Hong Kong stock market get benefit. Up to May 21, Harvest overseas and China International Asia-Pacific Advantage, whose net value fell to 0.6 yuan, now rose to 0.735 yuan and 0.74 yuan. Southern Global Enhanced rebound to 0.858 yuan, China AMC Global Enhanced also rebound to 0.8 yuan. The net value of ICBC Credit Global Allocation which was set up on February 14 reached 1.034 yuan, become one of the “making money” funds.

Another data to better explain the problem is that, up to May 21, The net growth rate of Harvest overseas, China International Asia-Pacific Advantage, Southern Global Enhanced, China AMC Global Enhanced and ICBC Credit Global Allocation are respectively 7.30 percent, 4.82 percent, 4.00 percent, 3.63 percent and 3.40 percent in one month. And in April, their average net growth rate even more than 7 percent.

Recalling the past few months, investors were afraid to hear QDII fund. Because of the Hong Kong “crash” and the hypo-loan crisis, Southern Global Enhanced and China AMC Global Enhanced and other two QDII funds that first launched out lost more than 30 billion yuan, and two of funds’ net value were down to 0.6 yuan in March.

Experiencing the embarrassment last year, QDII funds begin to recover, its net value grow sharp in April, and exceed the A-share fund for three consecutive months unconsciously. It is believed that the A-share fund net value’s bad performance has brought the opportunity for the QDII funds, although net value growth rate is still negative, it won the market’s attention because outperform the A-share market. During February to mid-April this year, A-share market continued down, but this time the Hong Kong market and overseas markets started to rebound ahead of the A-share market.

The embarrassing of “Target of 21 billion and actual issue 463 million”

Perhaps have remembered the QDII funds’ purchase money for hundreds of billions in one day, Perhaps subject to stimulate the QDII funds’ recover, although know the new funds are very gloomy, Fortune SGAM oversea decided the target of 210 billion on March 23, which bring an uproar in the industry.

On May 9, Fortune SGAM company announced that Fortune SGAM Oversea first collected were only 463 million copies. Moreover, according to media reports, it can collect more than 200 million copies which is called “survival” actually under the help of big shareholders. Announcement also showed that employees of Fortune SGAM company have bought 11.2447 million copies, the Fund’s total share of 2.43 percent, which enable the Fund to become the new funds in recent staff the highest proportion of the subscription funds.

463 million is 45 times less than 21 billion. This figure not only much less than China International Asia-Pacific Advantage which purchase money more than 100 billion yuan in one day, but also less than the ICBC Credit Suisse Global Allocation which collected 3.15 billion yuan.

Another QDII fund Yinhua global core only collected 417 million when he stop raising money on May 21, creating the first low raise scale.

It seems that, although the net value of QDII recover, inveseors did not confidence with it, new QDII fund launched at the wrong time, perhaps, QDII fund need time and real achievements to reach real recovery.

Appreciation of RMB in trouble

What is the QDII fund investors worry about currently?

“Experts say that, in appreciation of the RMB, the income of investment in QDII must be more than 10 percent, or we will not real gain, so I will not buy it.” Hangzhou fundholder Chen Baichuang told reporters.

The appreciation of RMB greatly effect QDII. Since 2008, the appreciation of the RMB against the U.S. dollar has more than 5 percent in less than five months. The end of last year, the chief economist of China International capital Co., Ltd Ha Jiming expected that the appreciation RMB against the U.S. dollar will be 10 percent in 2008. Now, we count on to the actual cost of QDII investment, the appreciation of the RMB natural loss 10 percent, coupled with the current bank deposit interest rates 4.14 percent, even if it does not consider possible increase factors of nterest rate, only QDII products in the U.S. dollar earnings should at least over 14 percent that the investement is cost-effective.

Our special financing manager said that observe the mature market overseas, the fund average annual income more than over 10 percent is good, how can China fund all achieve the target revenue more than 14 percent? watching the scope of these funds, we can see that the stocks mainly investe in China concept rebound more than 20 percent after collapse, but the later city sustained performance is worrying.

View the performance in overseas markets, Southern Global Enhanced is most mature in the few QDII funds, which is in the leadership position in the four QDII funds that launched in the same period. With the rising price of crude oil prices in Brazil and Russia, Southern Global Enhanced have got returns more than 15 percent in the two places. Southern Global Enhanced first collect money in Brazil, the software and hardware raw materials of this regional are very abundant, since this year, in the situation of rising international resources, the income of investing in Southern Global Enhanced have been more than 20 percent, and the investment fund assets ratio is more than 10 percent.

In response to that, the chief economist of Desheng fund research center Jiang Saichun said that in the overseas markets of different characteristics, China funds are not easy to defeat overseas funds. Therefore, we are concern at the products collocation and selective skill of QDII funds operators.

The more net value rebound, the more redemption pressure we will get.

When the markets are at the best time, Mr. Zhang used 80,000 yuan to buy 20,000 yuan China International Asia-Pacific Advantage, this fund fell to the lowest of 0.6 yuan, and Mr. zhang losed nearly 8,000 yuan, when the fund rebound to 0.7 yuan, he chose to redeem. “The overseas markets do not well, the risk in domestic stock market is nearly all release, so I redeem to buy domestic fund when it rebound.” Mr. zhang said.

The more net value rebound, the more redemption pressure we will get, when the QDII funds net value rebound to one yuan, the redemption is likely to reach the summit. Jiang Saichun also agree to this view, there are precedent abroad, but the amount of redemption will not be great, those who despair of QDII has been redeemed.

At present, there is a popular argument in the market is that some of QDII fund holders have redeemed most of the funds and turned to the domestic stock market because of the rebound of QDII net value.

View the investment style to choose QDII funds

Although the people of the QDII fund are still have not enough confidence, the funds net value rebound and outperform the A-share funds for three consecutive months, its function of detracting risk has already appeared.

The latest research of Goldman Sachs report that QDII fund is expected to reach golden period. The report pointed out that, on the one hand, to the short-term market prospects, U.S. investors still optimism at the long-term structural growth prospects of China. on the other hand, U.S. investors generally low investe with Chinese stocks, overseas capital is expected to investe Chinese stocks when the attractive time come, This is a good opportunity for the QDII funds that aimed at “China concept”.

Then, how to choose the QDII products?

In accordance with the analysis by Bian Xiaoning who is the analyst of Galaxy Securities Research Center, from the data of first season this year, Southern Global Enhanced is cautious in the investment idea, it increase the Fund’s allocation ratio, use more dispersed and extensive region collocation to reduce single market risk. China AMC Global Enhanced allocation become more active in the previous quarter, it has a certain extent expected for the market and adds to the stock copies, catching the rebound market of Hong Kong. Jiashi overseas and China International Asia-Pacific Advantage continue the radical strategy in the previous quarter, in the first quarter, the net value impaire is largest, and benefit the most in Hong Kong stocks market’s rebound in April.

The analysis of Bian Xiaoning is match to Our special financing manager. At present, the investment style of QDII fund has begun to appear division, investors should carefully analyse the product design, risk and asset allocation direction before they choose QDII funds.

Copyright Fund China 2008.

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