Chinese funds report record-high losses in 1H on changes in fair value
29/8/2008 17:04
Chinese funds suffered record losses in the first half of the year, mainly
from changes in fair value caused by the weakening stock market at both home and
abroad. TX Investment Consulting Co reported today the country's 364 funds
managed by 59 funds companies incurred record losses totaling 1.08 trillion yuan
(US$157.9 billion) between Jan. to June. The company said 961.9 billion yuan was
from changes in fair price, accounting for about 88.9 percent of the total
losses. Fair value is a rational and unbiased estimate of the potential
market price of goods, services or an asset. Due to the stock market slump in
the first half, stock-based funds suffered huge losses valued at 1.055 trillion
yuan, accounting for 97.52 percent of the total losses. Principal guaranteed
funds and bond funds lost 2 billion yuan and 1.2 billion yuan, respectively,
according to the report. During the period, the country's A shares index and
Hushen 300 index (the fund performance benchmark) plunged 48 percent and 47.7
percent, respectively. This was in reaction to the tightening monetary policy,
the economic slowdown and pressure of huge freed-up non-tradable shares coming
onto the market. The US sub-prime mortgage crisis and global inflation also
dented investor confidence. The softening overseas equity market resulted in
losses of 24.7 billion yuan to Qualified Domestic Institutional Investor (QDII)
funds. Losses were also incurred from stock trading price difference and
other expenses, including securities custodian fees, management fees and
commission expenses, which stood at 101.4 billion yuan and 35.5 billion yuan
respectively. However, the risk-free money funds turned out to be the only
survivor from the shaky stock market. They gained profits of about 1.30 billion
yuan. China Nature Asset Management manager He Yun said it was normal for
money funds to be popular in a sluggish market as their investment went to
short-term, low-risk securities, such as short-term bonds and treasury bonds
repurchase, among others. An unidentified manager at China International Fund
Management Co said the rising earning rates of central bank bills provided money
funds with good opportunities for investment.
Xinhua
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