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.

'It is easy money because primary offers often go up sharply on debut, and with so many funds coming into the market, naturally there is a need to expand the cake,' Shanghai Finance Securities analyst Shao Rui said.

'To continue to attract retail investors to the funds, the funds must show good profits,' he said.

Retail investors' market confidence had been shaken by poor corporate results, and fears of economic disruption stemming from the country's possible entry to the World Trade Organisation.

By giving all-out support to the development of mutual funds, Beijing also hoped to revive the lackadaisical secondary markets, which have been drifting listlessly.

Haitong Securities analyst Zhu Zhan said: 'The secondary markets are attracting very little money these days and the country hopes to make mutual funds their mainstay, so it needs to give them solid support.' FUND MANAGEMENT