The China Securities Regulatory Commission is considering allowing smaller fund houses to launch QDII funds as long as they have assets of at least 10 billion yuan (about HK$11.4 billion) - half the current 20 billon yuan minimum requirement, two fund managers said. Beijing's move to lower the asset requirements on overseas equity-based products is likely to enable an additional 10 mainland asset managers to sell qualified domestic institutional investor (QDII) funds by the end of this year. Yet analysts said the relaxation would not be enough to boost the mainland's outflow of capital because investors had shown little interest owing to the lacklustre performance of existing funds. No timetable for the policy change has been set, but analysts said they expected the new rule to take effect at the end of this year. 'The relaxation will make the QDII market more competitive, while investors interested in overseas stocks are given more choices,' said Z-Ben Advisors analyst Howhow Zhang. 'It doesn't necessarily mean more QDII funds will be launched.' In July 2007, Beijing allowed asset management companies to launch QDII funds, which let them raise money in yuan while investing in foreign equities under a trial scheme. At that time, the regulators were desperate to direct capital outflows as a way to ease inflation pressure in the domestic economy. The first batch of funds were easy to sell as thousands of investors believed Hong Kong-listed stocks were good buys since they traded at a huge premium to their A-share counterparts. But most of these investors lost money the next year after the stock market downturn caused by the global financial turmoil; the first batch of funds launched in the second half of 2007 were among the top losers. Each of them has lost more than 20 per cent of their value so far. In 2009, not a single QDII fund was launched on the mainland. 'QDII funds are now synonymous with bad investment products on the mainland,' Zheshang Securities analyst Zhou Liang said. 'Few investors made profits from investing in QDII funds.' Mainland investors are still barred from investing in overseas stocks directly. They can buy foreign shares only through the QDII funds run by asset managers or banks. The mainland said it would start a so-called 'through-train' programme in mid-2007, allowing mainland investors to buy Hong Kong-listed stocks themselves. But the scheme never materialised; top government officials feared a huge capital outflow would hurt the A-share market. Currently, 31 mainland fund companies are allowed to launch QDII funds. The total value of QDII funds now stands at about 100 billon yuan, compared with 2.1 trillion yuan worth of assets under management for A shares. The fund houses raised a combined 5 billion yuan for QDII products so far this year. Z-Ben Advisors predicted that the QDII product value would account for 15 per cent of the mainland's total fund sector in five years as investors were increasingly aware of diversifying their portfolios.