Quick gains elude QDII fund buyers as global equities dive

Mainland investors who flocked to buy qualified domestic institutional investor (QDII) products have learned a lesson that it is not easy to make quick gains from overseas stocks. Investments have shrunk amid the global rout triggered by the US subprime mortgage crisis.

Analysts said the setback was a 'double-edged sword' because it would help deter frenetic mainland individuals from buying blindly now they could invest directly into Hong Kong stocks.

Still, mainland financial institutions with QDII quotas said they were undaunted by the downturn and expected to strike it rich eventually in overseas markets.

As of August 14, the net asset value of China Construction Bank-managed Haiying No1 QDII fund quoted 95.34 fen per unit, dropping 0.9 per cent from a week ago and 5.9 per cent in three weeks. Investors had a paper loss of 4.66 per cent as it was sold at one yuan per unit.

Although Haixing No1 is the only QDII product managed by mainland banks that regularly published its performance, observers believed other QDII funds were also suffering losses as global markets plunged.

'We saw the real risks in overseas markets, though everyone knew it before as a common sense,' said Liu Lizhi, deputy general manager of personal banking product department at Bank of Communications. 'We will be more cautious in asset management in the future.'

In May, the mainland allowed banks with QDII quotas to buy overseas shares on top of fixed-income, low-yield products to encourage the outflow of foreign capital.