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Chinese QDII products totter amidst drop in international stock markets
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China's qualified domestic institutional investor products have been falling in global markets in recent weeks, with their net values shrinking due to a slump in international stocks.


All four stock-oriented QDII funds launched this year saw their net value fall below one yuan (13 US cents), the value set for fund subscriptions, Wednesday's China Securities Journal reported.


The QDII fund issued by the China Southern Fund Management Co. Ltd., also the country's first stock-oriented QDII fund, has seen its net value drop for two consecutive weeks. On October 26 it was 1.039 yuan and then fell to 1.024 yuan on November 2. It then dropped to 0.967 yuan on November 9, the report said.


The fund was once chased by domestic investors and raised more than 40 billion yuan on September 12, the first day of its issuance, far beyond its scheduled limit of 15 billion yuan.


"Fluctuations in international stock markets triggered by declining US stocks have pulled down QDII funds," said Xie Hongwei, the fund's general manager.


The QDII scheme, launched in July, allows mainland commercial banks, fund firms and insurance companies to invest in overseas financial markets, aiming to reduce China's excessive liquidity.


The QDII fund of the Harvest Fund Management Co. reported a drop of 7.1 percent since it was issued, down to 0.929 yuan as of November 9, the report said.


The QDII fund of the China AMC also saw its net value fall to 0.957 yuan as of November 9, while that of the China's International Fund Management Co. Ltd. dropped to 0.936 yuan, it said.


From November 1 to November 9, the Hang Seng China Enterprises Index slumped 11.8 percent and the Standard & Poor's 500 dropped 5.4 percent.


Other QDII products provided by commercial banks were also caught in the slide but suffered lighter losses as they were ordered to invest no more than 50 percent of their total assets in stock markets.


Analysts believed that the current drop was inevitable as stock markets in most regions of the world have been slapped by the US subprime crisis. However, China's QDII products would still have good performance in the long term.


The investment quota allowed to China's QDIIs reached US$42.17 billion at the end of September.


To date, 21 commercial banks, including both Chinese and foreign lenders such as HSBC China, Deutsche Bank, Agriculture Bank of China and Shanghai Pudong Development Bank, have been given a combined quota of US$16.1 billion.


Another five fund management firms, among them China AMC, enjoyed a combined investment quota of US$19.5 billion. Fourteen insurance companies, including Ping An of China and China Life Insurance, hold the remaining US$6.57 billion.


(Xinhua News Agency November 15, 2007)

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