BANKS will move cautiously in penetrating the wealth management business in the United States stock markets in the light of the current sluggishness due to the US subprime crisis.

"We will research the market,'' said Liu Lizhi, deputy general manager of personal banking at Bank of Communications. "We will move cautiously to launch related products when we think the right moment comes.''

Shanghai-based BoCom said it will launch products which guarantee the principal amount amid the current sluggish markets hit by the ripple effect of the US subprime crisis.

Chinese commercial banks are allowed to make investment on behalf of their clients in the US stock markets and selected public funds under the qualified domestic institutional investors, or QDII, scheme, regulators said on Monday.

Liu's view is echoed by Guo Xiaokai, who is in charge of client wealth management at Industrial Bank in Shanghai.

"We will launch products with stable returns like fixed income products amid the current capital market fluctuation,'' said Guo. "We will research deeply the opportunities and take cautious moves though some think it may be a good timing to step into the market as some shares are undervalued due to the subprime issue.''

Guo said the biggest challenge facing QDII products is the foreign exchange risk amid the appreciation of the yuan.

Another factor banks have to face when they plan to launch such products is the lack of interest by retail investors amid the current lackluster performance of QDII products.

China changed the rules to allow banks to pool clients' yuan assets to invest in overseas markets in 2006.

At the end of 2007, 23 home-grown and overseas banks have gained the license to step into the market while 16 banks have launched 262 products with a sales value of 41.4 billion yuan (US$5.9 billion).

"The move (to launch products) is unlikely to cast a big blow at domestic capital by channeling funds to other products in the short term as most QDII products are showing torpid performance,'' said Huang Zefeng, an analyst at Haitong Securities Co.