China's mutual funds gained moderate returns in February after declining more than seven percent in January, a report said yesterday.

However, all types of mutual funds stayed in the red during the past six months due to China's slumping stock market, according to Lipper Fund Market Insight Reports.

"Good February performance of small and medium shares made up for that of blue chips and bolstered fund returns," said Zhou Liang, China research head at Lipper, a fund-analysis unit under Reuters.

"But the growth was modest, and the half-year returns ended February were still negative."

Stock-invested mutual funds posted a growth of 1.2 percent last month, compared with mixed-invested funds' growth of 1.04 percent, one percent and 0.66 percent, depending on different combinations with bonds.

Products under the Qualified Domestic Institutional Investor scheme gave a better performance than their peers on the Chinese mainland. The average growth of the four QDII funds issued last year amounted to 3.32 percent in February, higher than the domestic mutual funds' performance.

Products under the Qualified Foreign Institutional Investor scheme reported a loss of 1.26 percent last month, as the world economic prospect continued to deteriorate after the US subprime mortgage chaos threatened a recession and shook investor confidence.

Zhou suggested mutual fund investors should not look for a big profit this year but pursue safer products that could beat inflation growth, such as bond-invested funds.

(Shanghai Daily March 12, 2008)