Minsheng Bank folds fund - ResearchInChina

Date:2008-03-28liaoyan  Text Size:
China Minsheng Banking Corp has liquidated a product that invests in Hong Kong funds amid rocky global markets hit by the fallout from the United States subprime-mortgage crisis.

The product was dissolved after its value declined by more than 50 percent, the Beijing-based bank said.

The product operated under China's qualified domestic institutional investor, or QDII, scheme as banks pool clients' assets and invest them overseas on behalf of the clients.

Minsheng sold 100 million shares for the one-year QDII product at one yuan (14 US cents) apiece last October and agreed to liquidate the fund when assets fell below 50 percent of their initial value.

Retail investors may also choose to sign a supplemental contract that they can still hold the product until the expiration date of this October, a banker said.

Authorities in June expanded the QDII program, which had initially been limited to banks for investments in fixed-income products to brokers and fund managers to help gradually channel funds into international markets.

Initial success

The QDII funds were welcomed by investors whose subscription outsized the offering in October when fund-management companies were allowed into the market.

However, QDII fund investors now have to face an average impairment of about 30 percent as the global markets are dragged down amid the ripple effect of the subprime crisis, which analysts say is yet to bottom out.

"It's difficult to see a strong rebound of the global stock markets as the subprime crisis shadow still looms," said She Minhua, a China Securities Co analyst.

"However, retail investors should also adjust their expectations that overseas markets may surge like the domestic market did in the previous two years."

In February 2007, Bank of China became the first bank to halt its QDII products but at that stage there was a huge redemption among investors who had lost confidence in the lukewarm products amid a booming domestic stock market.

The benchmark Shanghai Composite Index gained more than 80 percent last year after posting a jump of 130 percent in 2006. However, it has lost 35 percent this year.

Minsheng shares ended at 10.41 yuan in Shanghai yesterday, down 5.96 percent. The benchmark Shanghai Composite Index lost 5.42 percent to 3,411.49.

2005-2011 www.researchinchina.com All Rights Reserved 京ICP备05069564号-1