China's securities watchdog has halted approving sales of new A-share funds for more than a month in an apparent attempt to ease growth of already abundant stock-market liquidity, industry sources said today.

But the regulator may resume vetting applications to kick off new funds to invest in yuan-backed A stocks as early as this week as big-sized equity sales on the mainland have been working to soak up capital, according to the sources.

"We've seen a hiatus since early September as worries were mounting about overheating and excess liquidity,'' said a Shanghai-based fund source familiar with the situation. "We applied for a new equity fund three months ago and were not given a clear timetable for its launch.''

The stock authority last month slowed the pace of approving new domestic funds after allowing six fund managers to pool more than 50 billion yuan (US$6.67 billion) of client capital in August.

The last mainland A-share fund was launched by China Asset Management on September 5. Officials at the China Securities Regulatory Commission were not available to comment today.

The benchmark Shanghai Composite Index has risen by about 27 percent since the start of August as blue chips were snapped up on rosy earnings growth prospects. The index has jumped more than 110 percent this year on top of a 130 percent gain in 2006.

"Regulators also want to use the period to encourage capital outflows to help reduce pressures on the country's bulging foreign-exchange reserves,'' said a Shenzhen-based fund executive. ``We are now on track to launch products on that aspect.''

Chinese financial regulators have given licenses to six domestic fund managers to start helping customers invest in overseas securities in the past two months under the Qualified Domestic Institutional Investor scheme.

(Shanghai Daily October 8, 2007)