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SCMP Reporter

Mainland investors blame money managers for assets' woeful first-half performance
Mainland mutual fund investors are licking their wounds after being hit  by a  37.5 per cent loss in the first half of the year.
A 48 per cent slump in the stock market wiped out 1.2 trillion yuan (HK$1.36 trillion) of the net asset value of the nation's 408 mutual funds in the first six months, according to TX Investment Consulting.
The Shanghai Composite Index yesterday fell below 2,700 points - lower than the worst predictions by analysts - and adding pressure to fund managers to improve.
Fund managers, heroes of the bull market in the past two years,  are quickly being transformed into villains as investors blame them for the woeful investment performance.
The record loss  of market value is also a shock  to retail investors who had viewed mutual funds as a safe investment bet, believing the managers had the ability  to arrest the decline in the market.
'It was a wrong perception,' said Orient Securities analyst Hu Zhuowen. 'It is just a mission impossible for the funds to earn money amid the sharp decline.'
The regulator and investors hailed the rapid growth of the mutual funds industry last year, when the total value of assets increased almost fourfold, exceeding 3 trillion yuan and representing 35 per cent of the market's tradable capitalisation.
The Shanghai index continued to tumble yesterday, losing 84.498 points or 3.09 per cent to 2,651.605, the lowest close since February 5 last year.
Total market capitalisation of the Shanghai and Shenzhen stock exchanges stood at 17.29 trillion yuan yesterday, 47.1 per cent less than the 32.71 trillion yuan at the end of  last year.
Even the most pessimistic analysts had predicted that the market would be supported at the 2,700-point level.
Fears of new shares flooding the market  gripped investors  yesterday after the China Securities Regulatory Commission approved initial public offerings by Everbright Securities and South China Locomotive & Rolling Stock Corp.
The  two companies are expected to absorb  a combined 19 billion yuan of funds.
Richard Lu, a retail investor, said he started to buy fund shares when the Shanghai index dropped below  4,000 points  early this year, betting asset managers would find good bargains after a 20 per cent decline.
'Retail investors are always the losers,' Mr Lu said. 'The fund managers are still having a good life while abusing our money.'
Mutual fund managers had been the champions of the financial industry over the past two years, earning several million yuan in salaries each year despite often limited experience. The average experience of people in the mainland asset management sector is only 1.69 years, according to a report by Galaxy Securities.
Fund houses took  in a record 28.2 billion yuan of management fees  last year, up 395 per cent from 2006.
Mr Lu said he now realised that the fund managers  were as dumb as he  was when it came to stock picking because they  were unable to  assess the economic situation correctly.
Fund managers said the investors had only themselves to blame because they were ignorant of market rules.
'When we were rich in cash, we had to buy aggressively to chase high returns,' one Shanghai-based fund manager said. 'But when redemption pressure  was heavy, we were forced to cash out despite huge losses.'
Guotai Junan Securities forecast the  Shanghai index  might hit the 2,500-point level in the near future before bottoming out.
Shanghai-listed companies trade at an average of 19.98 times  earnings last year, the first time their valuation has fallen  below 20 times.
'It is ridiculous to expect any government incentives because of the dire earnings outlook,' said Guotai Junan analyst Zhang Linchang. 'The downturn will eventually stop when the corporate fundamentals can really support the stock prices.'
Heroes and villains
Fund managers are taking the flak for poor investment showing
The amount of losses mutual fund investors suffered in the first half: 37.5%



Mutual funds post 1.2tr yuan loss