China equities funds keep sliding
Lipper analyst Xav Feng says inflation concerns will continue to put pressure on China shares, but he urges investors to be patient because a rebound could come quickly.
Open-end funds in China extended their losses in June, except for money market portfolios. Equity funds were the worst performers, posting an average loss of 18.46% last month, bringing their six-month average loss to 43.40%, according to Lipper data.
Qualified domestic institutional investor (QDII) funds posted an average loss of 7.40% last month, much worse that the average 0.61% loss in May, but they still nevertheless outperformed all domestic classifications.
Qualified foreign institutional investor (QFII) funds posted an average loss of 20.15% last month, underperforming domestic equity funds and sliding an average of 42.49% for the first six months of the year. All the QFII portfolios tracked by Lipper posted a loss last month.
At the end of May, the China Securities Regulatory Commission (CSRC) approved QFII quotas totalling $10.57 billion for 56 foreign firms, according to Xav Feng, head of research for Taiwan and China at Lipper. The total net assets of the 19 QFII funds tracked by Lipper decreased to $6.878 billion in June from $7.504 billion in May.
China launched the QFII programme in mid-2003 to allow approved foreign institutions to trade A-shares and bonds on the Shanghai and Shenzhen exchanges. The programme was part of the governmentÆs efforts to open ChinaÆs capital market and ease controls on the capital account, under which the yuan isnÆt fully convertible.
Amid an uncertain global economic backdrop, inflation remains among the key concerns in China. The mainlandÆs annual consumer inflation has eased to 7.7%, but is still not far from its peak of 8.7% in February. The consumer price index in the first five months rose 8.1% from a year earlier.
Inflationary pressures have been offset by ChinaÆs economic growth, which ironically has been stimulating price increases. ChinaÆs economy expanded 10.6% in the first quarter compared with a year earlier, down from 11.2% in the fourth quarter of 2007.
ôChina is on track for its sixth straight year of double-digit growth in 2008, but momentum will probably slow for the first time in nearly a decade,ö says Xav.
To curb bank lending and slow investment flows into the stock market, the People's Bank of China hiked the reserve ratio to 17.5% for commercial banks, the fifth increase this year. Xav believes the Chinese government might keep to its policy of easing inflation risk by macroeconomic controls and tightening monetary policy.
ôThe Shanghai Composite Index has plunged 48% for the first half of 2008. All eyes are focused on the China market bottoming out,ö Xav says. ôWith surging inflation challenges in ChinaÆs economy, investor confidence has become fragile. However, China's economy should continue to develop steadily. Once China inflation appears to be descending, the China market might rebound quickly in the future. Investors should be patient.ö
Average performance of fund groups in China in June:
Money Market CNY +0.25%
Bond CNY -0.44%
Guaranteed -0.70%
Mixed Asset Other Conservative -4.89%
Mixed Asset CNY Balanced -11.51%
Target Maturity -12.02%
Mixed Asset CNY Flexible -14.27%
Mixed Asset CNY Aggressive -15.32%
Equity China -18.46%
Top performing QFII funds in June:
PCA China Dragon A Share Equity A-1 Class C -15.79%
Nikko AM China A Stock Fund -18.16%
Nikko China A Share Fund 2 -18.22%
Morgan Stanley China A Share Fund Inc -19.33%
ABN AMRO China A Share Fund -19.78%
ING China A Share Fund P Class -19.78%
JF China Pioneer A-Share -20.41%
iShares FTSE/Xinhua A50 China Tracker -21.20%
Hang Seng China A-Share Focus A1 -21.34%
Hang Seng China A-Share Focus -21.68%
WISE-CSI 300 China Tracker -22.49%
APS China A Share -23.61%
Qualified domestic institutional investor (QDII) funds posted an average loss of 7.40% last month, much worse that the average 0.61% loss in May, but they still nevertheless outperformed all domestic classifications.
Qualified foreign institutional investor (QFII) funds posted an average loss of 20.15% last month, underperforming domestic equity funds and sliding an average of 42.49% for the first six months of the year. All the QFII portfolios tracked by Lipper posted a loss last month.
At the end of May, the China Securities Regulatory Commission (CSRC) approved QFII quotas totalling $10.57 billion for 56 foreign firms, according to Xav Feng, head of research for Taiwan and China at Lipper. The total net assets of the 19 QFII funds tracked by Lipper decreased to $6.878 billion in June from $7.504 billion in May.
China launched the QFII programme in mid-2003 to allow approved foreign institutions to trade A-shares and bonds on the Shanghai and Shenzhen exchanges. The programme was part of the governmentÆs efforts to open ChinaÆs capital market and ease controls on the capital account, under which the yuan isnÆt fully convertible.
Amid an uncertain global economic backdrop, inflation remains among the key concerns in China. The mainlandÆs annual consumer inflation has eased to 7.7%, but is still not far from its peak of 8.7% in February. The consumer price index in the first five months rose 8.1% from a year earlier.
Inflationary pressures have been offset by ChinaÆs economic growth, which ironically has been stimulating price increases. ChinaÆs economy expanded 10.6% in the first quarter compared with a year earlier, down from 11.2% in the fourth quarter of 2007.
ôChina is on track for its sixth straight year of double-digit growth in 2008, but momentum will probably slow for the first time in nearly a decade,ö says Xav.
To curb bank lending and slow investment flows into the stock market, the People's Bank of China hiked the reserve ratio to 17.5% for commercial banks, the fifth increase this year. Xav believes the Chinese government might keep to its policy of easing inflation risk by macroeconomic controls and tightening monetary policy.
ôThe Shanghai Composite Index has plunged 48% for the first half of 2008. All eyes are focused on the China market bottoming out,ö Xav says. ôWith surging inflation challenges in ChinaÆs economy, investor confidence has become fragile. However, China's economy should continue to develop steadily. Once China inflation appears to be descending, the China market might rebound quickly in the future. Investors should be patient.ö
Average performance of fund groups in China in June:
Money Market CNY +0.25%
Bond CNY -0.44%
Guaranteed -0.70%
Mixed Asset Other Conservative -4.89%
Mixed Asset CNY Balanced -11.51%
Target Maturity -12.02%
Mixed Asset CNY Flexible -14.27%
Mixed Asset CNY Aggressive -15.32%
Equity China -18.46%
Top performing QFII funds in June:
PCA China Dragon A Share Equity A-1 Class C -15.79%
Nikko AM China A Stock Fund -18.16%
Nikko China A Share Fund 2 -18.22%
Morgan Stanley China A Share Fund Inc -19.33%
ABN AMRO China A Share Fund -19.78%
ING China A Share Fund P Class -19.78%
JF China Pioneer A-Share -20.41%
iShares FTSE/Xinhua A50 China Tracker -21.20%
Hang Seng China A-Share Focus A1 -21.34%
Hang Seng China A-Share Focus -21.68%
WISE-CSI 300 China Tracker -22.49%
APS China A Share -23.61%
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