China International Capital Corp will today become the Chinese mainland's first brokerage to launch a fund product under the Qualified Domestic Institutional Investor program.

 

The broker's US$5-billion fund, which will start subscriptions today, will be operated by its office in Hong Kong.

 

The fund differs from other QDII products that are issued by mutual fund management firms in that it is flexible in equity investments.

 

When the stock market encounters a lot of risks, the fund's proportion of equity investment can be reduced to as low as 25 percent while it can be raised to 95 percent in a bullish market, with up to 85 percent invested in Hong Kong-listed shares.

 

"It provides a tool to counter risks and allows the fund to share growth when the stock market is bullish," Wu Xianxing, an analyst at Haitong Securities Co, said. "Such a design may boost sales of the product."

 

Other products issued by mutual fund management firms usually have more than half of their investment in equities, according to Wu.

 

For example, the China Opportunity Global Stock Fund, issued by ICBC Credit Suisse Asset Management Ltd last month, has 60 percent of its assets in stocks.

 

Besides CICC, six other Chinese brokerages have been approved to start businesses under the QDII - CITIC, China Merchants, Guotai Jun'an, Everbright, Orient and Huatai Securities. They join fund management firms, banks, insurers and trust companies.

 

(Shanghai Daily January 16, 2008)