China Mutual Fund Industry Nearly Quadruples in 2007

China's 363 mutual funds totaled $450 billion in 2007.

As millions of investors rushed to convert their bank deposits for higher returns in the stock market, China's mutual fund industry nearly quadrupled in 2007, state media said Jan. 4. Net assets of China's 363 mutual funds totaled 3.3 trillion yuan (US$450 billion) by the end of 2007, up from 856.5 billion yuan a year earlier, the China Securities Journal reported, citing data from Galaxy Securities.

A survey conducted late last year showed that 83% of 14,800 respondents thought mutual funds were the first choice for wealth management, the report said. Mutual funds are particularly attractive to Chinese who are eager to profit from the booming stock market, analysts said, adding that with around 16 trillion yuan in bank deposits the trend may well continue.

"People are willing to invest their money, and they've been keen to shift from the low-return bank deposits to mutual funds where experts handle their funds," said Yi Linming, an analyst with Industrial Securities. "Once they realize investing in mutual funds is more profitable and less risky than buying individual stocks by themselves, they just swarm to funds. It's the herd instinct," said Yi.

China's stock market rose about 9% after a volatile 2007 despite an 18% decline in the key index in November -- its biggest monthly drop since July 1994.

Copyright Agence France-Presse, 2008

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