China's Harvest Fund Management Co. Ltd. (Harvest), 19.5-percent owned by Germany's Deutsche Bank AG, has become the first joint venture fund approved as a qualified domestic institutional investor (QDII) authorized to invest overseas, and is set to launch its first offshore fund within a month.
"The specific investment quota is to be decided by the authority, but we are actively preparing, and the new fund could be ready very soon," said Hong Qing, associate director of Harvest's marketing department.
The first Harvest QDII fund would focus on common stocks and preference shares of companies with major operations in China listed in Hong Kong, Singapore, and New York. The overseas adviser of Harvest was Deutsche Asset Management, said the company.
Beijing adopted the QDII program last year to broaden investment alternatives for local investors and encourage capital outflow.
Two Chinese fund management companies, China Southern Fund Management Co., Ltd. and China Asset Management Co. Ltd. obtained approval last week after the government expanded the program to include fund management firms.
Harvest general manager Zhao Xuejun said the program expansion was "a major reform in financial service, and a strategic movement of the foreign exchange system reform in China".
"The QDII program allows local investors to put their money in foreign capital markets, and will alleviate the pressure for further Chinese yuan appreciation," said Tan Yaling, a research analyst with the Bank of China.
However, some analysts say the demand for QDII products may not be strong due to the bullish domestic stock markets, and the profits made in overseas markets may be offset by currency appreciation.
Zhao agreed the appreciation of Chinese yuan brought uncertainty to overseas investment, but he said, "Diversified global investment can dilute the risk and guard against market slump, which may hurt badly if the fund invests heavily in a single market."
Tan said, "Foreign capital markets are more mature and better regulated, and the long term investment returns in those markets can be quite satisfactory."
Last year, Shanghai-based Hua An Fund Management Co. Ltd. became China's first fund management firm to be allowed to invest overseas as a pilot QDII, with a quota of 500 million US dollars.
Its first QDII product, launched in November, raised 197 million US dollars and yielded five percent in the following six months.
(Xinhua News Agency August 2, 2007)
