Bond, equity fund returns tank in Q3

The 24 domestic fund companies which have so far released their quarterly financial statements suffered 22.50 billion yuan ($3.60 billion) in combined investment losses from 365 fund products during the third quarter, reversing from the 17.82 billion yuan in profits they earned between April and June, according to a report issued Wednesday by TX Investment Consulting Co Ltd, a Beijing-based fund research firm.

Specifically, 232 equity fund products offered by the institutions lost 24.22 billion yuan over the period, while 90 bond-backed funds posted deficits of 527 million yuan.

The slowing domestic economy is largely to blame for the dismal returns of equity funds, which account for the lion's share of the funds in the Chinese capital market, Qiu Yanying, an analyst from TX Investment, told the Global Times.

From July to September, the Shanghai Composite Index and the Shenzhen Component Index have fallen 6.26 percent and 7.33 percent respectively.

According to Qiu, the equity funds which experienced the biggest investment drains were those exposed to the country's manufacturing and real estate sectors, which have been roiled by weakening demand for Chinese exports overseas and government measures aimed at cooling the domestic housing market for much of the year.

Meanwhile, funds linked to China's debt market have been impacted greatly by soaring financing costs, which continue to ramp up bond yields, said Zhang Yongmin, an executive manager from Qilu Securities.

Since mid-September, when a third round of quantitative easing from the US Federal Reserve sparked fears about rising inflationary pressure, local investors have been expecting planners at the People's Bank of China to lower the reserve requirement ratio for the country's banks to help them shore up their loan businesses, yet such a development has not materialized, keeping capital costs and bond rates elevated, Zhang explained.