Beijing has taken steps to allow state-approved mutual funds to make easy money in a bid to lure retail investors to play the markets through these investment vehicles.
The move comes as the government plans to build up a base of institutional investors to stabilise volatile stock markets and pave the way for more listings of state enterprises.
Ten more mutual funds are expected to sell shares to the public in the coming year, adding to the 19 already approved, which have a combined capital base of 47 billion yuan (about HK$43.8 billion).
In the latest package of goodies for funds, the China Securities Regulatory Commission said funds could: apply for a combined stake of at least 20 per cent of new-share offers by companies offering 50 million new shares to the public; allow funds to invest up to 30 per cent of their assets in new-share offers annually, but money invested in public offerings of at least 400 million shares will not be counted in the 30 per cent cap; sell off 50 per cent of the share-debut purchases, and keep the remaining 50 per cent for at least six months; and subscribe to additional or rights share sales by companies already listed, with the size decided by fund managers, underwriters and companies involved.
The government measures improved substantially on previous ones, which allowed mutual funds to buy combined stakes of 10 to 20 per cent in new offers, depending on the issue size; invest up to 15 per cent of their assets in shares; and freeze new share allotments for two months before they could be traded.
Analysts said the moves were aimed at expanding the size of primary offers to mutual funds, whose size has grown significantly.