Harvest QDII fund records heavy losses on HK downturn

PUBLISHED : Wednesday, 23 January, 2008, 12:00am
UPDATED : Wednesday, 23 January, 2008, 12:00am

Harvest Fund Management, Deutsche Bank's mainland partner, yesterday reported a heavy fourth-quarter loss for its overseas fund, hurt by a downturn in the Hong Kong stock market.

The poor performance of Harvest's qualified domestic institutional investor fund, which pools mainland investors' money to buy overseas listed shares, is expected to pave a rocky road for a new batch of mainland brokerages planning to offer similar products, analysts said.

Harvest Overseas Fund lost 3.6 billion yuan from October 12 to the end of last year, or 12.1 fen less than the one yuan per subscription unit price, according to a report on Harvest's website.

The fund's unit price closed at 80.4 fen yesterday.

Three other equity-based QDII funds - JP Morgan Fund, Huaxia Global Selected Stock Fund and Southern Global Enhanced Balanced Fund - also suffered losses and are quoted below 80 fen per unit.

Gao Zhanjun, executive director at Citic Securities' research department, said it would be unfair to blame fund managers for the QDII losses as most investors had been burned amid the market rout.

'There is not much you can do when everyone is losing money in the market,' Mr Zhou said.

Jing Ulrich, chairman of China equities at JP Morgan Securities, said the lukewarm performances of those funds would dampen retail interest in overseas investments.

'Subscription for the next batch of QDII funds may extend over days and weeks as investors adopt a wait-and-see approach,' Mrs Ulrich said.

Everbright Securities, Orient Securities and Huatai Securities are the second batch of companies approved to sell QDII funds.

Zhou Liang, Lipper's China research head, agreed QDII products had lost their allure for retail investors, but H shares, or Hong Kong-listed state-owned firms, could still offer good returns over the long term.

'Their fundamentals have not been changed by this correction, and H-share prices are still much cheaper than their A-share counterparts. They would offer much bigger profit margins for mainland investors,' Mr Zhou said.