Fund firms hit hard in Q3

As many as 23 out of the 24 fund management companies on the Chinese mainland posted a decline in total net asset value in the three months ending Sept 30, mainly because of the poor performance of the stock market during that period.

Wind Info, a Chinese financial-data provider, noted in its latest report that the 6 percent fall in the Shanghai Stock Exchange wiped out a total 22.5 billion yuan ($3.60 billion) in asset value of the funds managed by the 23 companies. The result was in sharp contrast to a combined gain of 17.82 billion yuan in the second quarter.

Among the 24 fund companies that had released Q3 reports by Wednesday, China International Fund Management Co Ltd was the only one to report positive earnings. Funds controlled by the company made a total profit of 82 million yuan in the third quarter.

Hardest hit were equity funds, which lost a total of 17.42 billion yuan. Hybrid funds, which invest part of the assets they manage in fixed-income securities and other instruments, lost 6.72 billion yuan in value.

The net asset value of all mainland stock-oriented funds saw significant drops in the third quarter, due to sharp falls in the domestic stock market and slower GDP growth, analysts said.

The fixed-income market also declined in the third quarter, recording a total loss of 527 million yuan across 90 bond funds.

Despite the gloomy overall market, qualified domestic institutional investor funds and currency funds reported rising performances, the only ones that had positive earnings in the third quarter.

As many as 16 QDII funds reported current earnings of 1.16 billion yuan; currency funds reported earnings of 1.08 billion yuan.

Fund managers said the domestic stock market had a significant effect on the fund performance, and many stock-oriented funds saw their net worth reduced because of the fluctuating domestic stock market; in the fourth quarter, however, the performance may be better as experts expect a better macro environment for the market.

Plans made at the 18th National Congress of the Communist Party of China, which will open in Beijing in early November, may bring more confidence to investors and more investment opportunities, according to Xu Zihan, portfolio manager with Yinhua Fund Management Co Ltd.

The market may see policies that spur economic growth, pushing up the profits of enterprises and supporting stable GDP growth, which will benefit fund market in various ways, Xu said.

Zhang Qi, a stock analyst with Haitong Securities Co Ltd, agreed, saying that domestic stock markets may continue to fluctuate in the fourth quarter, but it is less likely that stock markets will fall significantly in the last three months of the year.