QDII funds beat rivals with 5.6pc return

The mainland's first nine overseas equity-based funds generated an average 5.6 per cent return for investors last year, outperforming their A-share counterparts as they benefited from a global market recovery.

The performance will probably whet mainlanders' buying interest in the so-called qualified domestic institutional investor products which have received a lukewarm response from investors in the past three years.

'It was not a surprise to see a positive return by the QDII funds last year because of the strong overseas equity markets,' said Z-Ben Advisors analyst Howhow Zhang. 'QDIIs had long been ignored by investors who were keen to chase handsome returns on the volatile A-share market.'

Beijing allowed the mainland's biggest mutual fund companies to launch QDII funds in 2007, giving investors an indirect access to the overseas-listed stocks. It halted new QDII approvals in August 2008 as the funds suffered severe losses amid the global financial turmoil.

Under the QDII scheme, selected institutions raise funds in yuan before converting into US dollars to buy foreign equities. It was not until January last year that the regulator started approving new overseas funds.

Most of the 18 newly launched funds last year also capitalised on the market recovery abroad, generating returns for investors.

On the mainland, the stock-focused funds posted a scant 1.2 per cent gain last year in tandem with a market slump. The Shanghai Composite Index lost 14.3 per cent last year, the world's third-worst performing index.