China fund profits surge in Q2

Jul 22, 2012

Equity funds contribute the most to the improved earnings despite their net outflows and a lacklustre stock market, but QDII fund profits turn negative.

China's struggling mutual funds industry seems to have gained a new lease of life, with mainland asset managers posting combined profits of Rmb61.9 billion in the second quarter, despite the A-share market trading flat in the period.

The aggregated profits of 1,003 mutual funds managed by 67 fund houses have risen 63% over the first quarter's Rmb38.1 billion. The CSI 300 index rose by just 0.27% in Q2, following a climb of 4.65% in the first quarter.

Sixty-five of the 67 companies achieved positive profits in the second quarter. The top five were the same as in the first quarter, namely Guangfa (Rmb4.33 billion profit), Harvest (Rmb4.27 billion), Bosera (Rmb3.70 billion), E Fund (Rmb3.63 billion) and China Asset Management (Rmb2.65 billion). However, China AMC’s profits more than halved quarter-on-quarter from Rmb5.97 billion.

Equity funds (contributing profits of Rmb33.7 billion) and balanced funds (Rmb18.3 billion) were the biggest earners, followed by bond funds (Rmb8.5 billion) and money-market funds (Rmb4.5 billion).

However, qualified domestic institutional investor (QDII) funds suffered, posting losses of Rmb4.1 billion for Q2, having recorded profits of Rmb5.1 billion in the first quarter.

The only QDII funds to post profits were two real-estate investment trusts (Reits): one managed by Lion, tracking the FTSE Epra/Nareit Developed Reits Total Return Index, made a profit of Rmb7.9 million; and one from Penghua tracking the MSCI US Reit Net Daily Total Return Index, which recorded a Rmb1 million profit. But both underperformed their benchmarks, by 2.02% and 2.40% respectively.

As mutual funds started to turn losses into gains, investment momentum started to pick up again. Since the first quarter, open-ended funds have seen net inflows.

Net new subscriptions totalled 29.5 billion shares in the second quarter. Money-market and bond funds were the most popular, receiving net new flows of 61.6 billion shares and 27.5 billion shares, respectively. Equity funds suffered net redemptions of 36 billion shares, despite being more profitable.