THE average return of funds managed by overseas institutions trading in yuan-denominated shares slumped 13.99 percent in the first three quarters of this year, following an 18.96 percent decline in the Chinese mainland's key stock index, an industry report said.

Funds managed under the Qualified Foreign Institutional Investor program, which allows overseas investors to invest in stocks, bonds and funds on the mainland, showed bigger declines than the 5.42 percent decrease posted by domestic equity funds, research firm Lipper & Co said yesterday.

However, the Shanghai Composite Index edged up 0.64 percent last month, helping QFII funds regain ground, with a 0.6 percent increase for September. That compared with an average return of 2.13 percent for domestic equity funds, the report said.

"Investor confidence improved after the country's key stock index headed north for three straight months," said Xav Feng, research head of Lipper China. "An upswing in the market can be expected in the fourth quarter, with the inflow of 'hot money' from international markets."