(Agencies/China Daily)
Updated: 2008-01-24 10:27

China's securities regulator has approved three new domestic equity funds to raise over $2 billion, people close to the situation said yesterday, in a move likely to be seen as a boost to battered stock markets.

Related readings:  Equity funds post first decline in June  Private equity funds should be encouraged  Four equity funds set to get the nod  Equity funds to get new life

They are the first such approvals in five months as the China Securities Regulatory Commission (CSRC) had stopped approving new equity funds since September in a bid to prevent the stock market from overheating late last year.

The Shanghai Composite Index nearly doubled in 2007 after it gained 130 percent in 2006. The index closed up more than 3 percent yesterday, boosted by the new fund approvals, but has dropped nearly 15 percent from a 2008 high on Jan 14, hit by sliding global markets and concern about heavy new supplies of shares in China.

An executive at Shanghai-based Orient Securities Co confirmed his company had received CSRC approval for a fund product to invest in the domestic market.

Another executive at Shenyin & Wanguo Securities, one of China's 10 biggest brokerages, also based in Shanghai, said it had received CSRC approval for a similar equity fund product.

A source close to CSRC said Zheshang Securities in the eastern province of Zhejiang had also received the same kind of approval early yesterday.

"We're certainly very happy to win the approval as we believe this can be a good time for us to invest after recent sharp falls in domestic stocks," said the Shenyin & Wanguo executive.

Each of the products will be allowed to raise up to 5 billion yuan to invest in domestic stocks, said the two brokerage executives and the source close to CSRC, who all declined to be identified because they were not authorized to speak to the media before official announcements.

The three brokerages plan to launch the fund products soon and will invest in either domestic stocks directly or Chinese stock mutual funds, they said.

Last June, a day after the Shanghai index sank more than 8 percent, the CSRC approved four equity funds worth 40 billion yuan in total, triggering a domestic stock market rebound as Chinese investors saw the move as a signal the government would not let its market crash ahead of this summer's Beijing Olympics.

"This is clearly an emergency move to rescue the market from further collapses," said Jiang Jianrong, analyst at Shenyin & Wanguo Securities in Shanghai.

"Although the size of the funds is small, it's a clear and positive message from the regulators that the government would intervene if the market continues to fall. More funds are expected to be approved in the future," she added.