The average return of funds managed by overseas institutions to trade in yuan shares rebounded 4.48 percent last month, thanks to the recovering economy and loose monetary policies that supported the stock market.

The return was lower than that of domestic equity funds, which reported a 5.4-percent growth in average return, according to fund research firm Lipper & Co.

In the first three quarters, however, the average return of funds operating under the Qualified Foreign Institutional Investor program surged 55.28 percent from a year earlier, higher than a 46.49-percent growth for domestic equity funds.

"The Shanghai Composite Index recovered 4.19 percent last month after data reflected a growing economy, and the central bank pledged to continue its loose monetary policies," said Xav Feng, research head of Lipper China.

"But investor confidence is still weak on concerns of asset bubbles after a batch of firms gained approval to launch initial public offerings," Feng said.

A total of 28 start-up firms are hoping to list on the upcoming Growth-Enterprise Market in Shenzhen, a Nasdaq-style board that will finance smaller companies which face difficulty in getting loans from banks.

The State Administration of Foreign Exchange has raised the limit that individual overseas institutions can invest in the mainland's stock markets.

Each QFII investor is allowed to invest as much as US$1 billion, up from the existing US$800 million.

The regulator has approved 87 QFII funds.