China’s securities watchdog has given the green light to the country’s first stock-oriented fund managed by a QDII (qualified domestic institutional investor), Monday’s Shanghai Securities News reports.

The fund, established by the China Southern Fund Management Co., Ltd., is to be launched in RMB on September 12 and invested in global stock markets.

A fund industry analyst said the launch of the new fund was a landmark step in China’s fund industry, meaning that domestic capital can flow over the border to seek better returns.

The new fund differs from existing QDII funds in that it can invest 100 percent of its assets in global stock markets, instead of investing low-risk, low-return bond and currency markets only. The report said it will operate in the markets of 48 countries and regions, out of which the ten most valuable markets will be carefully selected for key investment.

Currently the 10 markets include the developed markets of the United States, Japan, China’s Hong Kong, Switzerland and Italy, as well as emerging markets of Russia, India, Brazil, Malaysia and the Republic of Korea.

In developed markets, the fund aims to gain steady average income in the long term by investing in ETFs, while in emerging markets it will mainly invest in ETFs and mutual funds. In Hong Kong, it will directly invest in stocks.

In an effort to curb excessive liquidity, the Chinese government has tried to encourage investment in overseas markets since 1996. The Shanghai-based Hua An Fund Management Co., Ltd. became China’s first fund management firm to be allowed to invest overseas as a pilot QDII, with a quota of 500 million U.S. dollars.

Its first QDII product, launched in November last year, raised 197 million U.S. dollars and yielded five percent over the subsequent six months.

Source: Xinhua

Copyright Fund China 2009.

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