The natural thing you will want to ask is how well the QDII has done before entering this extended pact with the SEC to allow Chinese retail investors in American markets. Our favourite official publication, the China Daily, says not well at all since virtually all the existing QDII funds had negative returns (dontcha just love that oxymoron) in 2007. Worse, one of the QDII schemes went kaput. Interestingly, though, the article suggests there is no shortage of FIs wanting to set up their own QDII schemes in the meantime:
Chinabanking and securities regulators signed an agreement with their U.S.counterparts Monday that will help to lay the groundwork to enable Chinese investors to buy and sell stocks and mutual funds. U.S.
The agreement signed between the Securities and Exchange Commission and the China Banking Regulatory Commission marks a further expansion of QDII -- the qualified domestic institutional investor program -- and brings the
U.S.in line with similar agreements signed between Beijingand regulators in Singapore, Hong Kong, Japanand the U.K.
Chinabanking and securities regulators signed an agreement with their U.S.counterparts Monday that will help to lay the groundwork to enable Chinese investors to buy and sell stocks and mutual funds. According to data from the U.S. Treasury Department from last June, U.S. Chinaheld $922 billion in U.S.securities -- but only $29 billion of that in stocks. Most of the rest is held in U.S. government bonds. U.S.
"What we've seen over the last six to 12 months,
has a lot of capital and is looking for ways to make that capital work harder and more efficiently," said Charlie Awdry, a fund manager for Gartmore's China Opportunities Fund. "This is illustrative of the broader engagement between China and the rest of the world." China
Analysts said Chinese banks may not be in much of a rush to invest in the
, however. "It's significant in the sense that, in the long run, Chinese money will invest in the U.S., but this is just part of the ongoing process," said Lan Xue, Citigroup's head of China research in Hong Kong. "The actual implementation will be long and slow," said Gartmore's Awdry. U.S.
Glenn Maguire, head of Asian economic research for Societe Generale in
Hong Kong, pointed out that investors bid up Hong Kong-listed stocks on a similar announcement, but the money from the mainland largely didn't materialize. "Any type of change to capital outflows is evolutionary rather than revolutionary," he said. Because of the appreciation in the yuan, stress in the U.S.financial sector and the upcoming U.S.presidential election, Chinese banks might not exhibit such a great appetite for equities, he said. U.S.
China's institutions and sovereign wealth funds have suffered from investing in financial-services stocks like Blackstone Group, Merrill Lynch & Co. and the 's Barclays. Still, Shanghai-listed stocks have done ever worse than their U.K. counterparts this year. The Shanghai Composite is down over 30%, compared to the 6.7% fall for the S&P 500. U.S.
China's four stock-oriented qualified domestic institutional investor (QDII) funds have all reported big losses last year, and fund management companies blamed the failing performance on the subprime crisis that caused volatility in the world market, Monday's China Securities Journal reported. US
Net value of the four QDII products - JP Morgan Fund QDII, Harvest Overseas Fund, Huaxia Global Selected Stock Fund and Southern Global Enhanced Balanced Fund - shrank by 6.3 percent to 12.1 percent of its initial value by the end of last year, according to their 2007 annual reports.
Southern Global made the smallest loss in net value while Harvest Overseas suffered most. Reports in December said Southern Global suffered slightest slump in net value as it positioned more in funds than in stocks.
In the meantime, the four products also posted negative growth over the earlier-fixed benchmark growth rate, which serves as a major reference for investors to judge the performance of a fund, the biggest negative growth rate, at 10.91 percent, was Harvest Overseas Fund.
By March 22, all four stock-oriented QDII funds saw their net value fall below one yuan (14.3 US cents), the value set for fund subscriptions, with Southern Global at 0.765 yuan, Huaxia Global at 0.713 yuan, Harvest Overseas at 0.613 yuan and JP Morgan at 0.632 yuan.
subprime crisis should be blamed, the four fund management companies said in their annual reports. Huaxia Global said the world stock market, emerging markets segment in particular, was badly hit by a slowdown in the US USeconomy as well as the world economy after the subprime crises surfaced in the second half of last year in the . Southern Global said the negative earnings were due to the adjustment of the world market under the influence of the subprime risks. However, Harvest Overseas cited as well the appreciation of the Chinese currency against the dollar during the period for its huge losses. United States
These four QDII funds, Southern Global being the first approved in September last year to invest 100 percent of its assets in global stock markets instead of low-risk, low-return bond and currency markets only, currently invested heavily in the Hong Kong market, which was vulnerable to difficult conditions of the US market.
However, the pace of growth of QDII funds in
was not hampered. Apart from the fifth QDII fund already launched in January, namely ICBC Credit Suisse China Chance Global Allocation Fund, several other fund management companies have recently gained QDII status and are preparing to launch their QDII products. China
They include Huabao Industrial Fund Management Ltd, Fortis Haitong Investment Management Co Ltd, China Universal Asset Management Co Ltd and E-fund Management Co Ltd…
China's QDII funds and products, including bank-backed funds, were pushed into a loss as the credit crisis began to unfold and spread. China Minsheng Banking Corp said on March 19 that it would liquidate a QDII fund and repay investors, as required if the fund's assets fell below 50 percent of their initial value. This had raised concern about a wider failure of QDII products. US 's banking supervisor on Friday had asked banks to fully evaluate investors' risk tolerance shortly after the liquidation announcement from Minsheng. China