Foreign investors sound note of caution

FOREIGN investors were cautious about their investment in China's stock market last year, going by the amount redeemed, said a report yesterday.

Foreign fund managers reported redemption worth US$2.2 billion from their funds under the Qualified Foreign Institutional Investors program last year, which showed clearly their cautious attitude, according to Lipper Fund Market Insight Reports.

However, many foreign funds that traded yuan-backed shares yielded substantial profits for their investors, with Morgan Stanley China A Share Fund ranked at the top by posting a net return of 174.38 percent in 2007.

The earnings of foreign-invested A share funds in total rose 123.54 percent last year, lower than a 137.66-percent increase of their Chinese counterparts.

"Foreign investors feel less convinced about the acceleration of China's A-share stock market," said Zhou Liang, China research head at Lipper, a fund-analysis unit under Reuters. "But with the newly issued products, the scale of foreign funds is still expanding."

By the end of last year, net assets managed under the QFII program amounted to US$8.18 billion, compared with 3.27 trillion yuan (US$442.5 billion) of total assets in China's mutual fund industry.