Fund fare

Eight fund companies have been granted qualified domestic institutional investors (QDII) status since July, when the regulator first allowed firms to raise domestic funds for investment in overseas stocks.

Investors' enthusiasm for QDII funds was beyond the expectations of many, with the $4 billion quota for each of the three approved QDII funds realized on the first day of their issuance.

ICBC Credit Suisse Asset Management Co Ltd is the latest fund company to receive a QDII certificate from the China Securities Regulatory Commission. It is also the first bank-invested fund to be granted a license.

China Business Weekly reporter Zhang Ran has an exclusive interview with Guo Tehua, general manager of the ICBC Credit Suisse Asset Management Co Ltd about its QDII business:

Q: What impact do fund companies joining the QDII program have on the investment market?

A: First, fund companies joining the QDII plan will bring diversified investment products to the market.

Though it is widely known that A shares witnessed phenomenal growth in the past year, there are indeed a lot of investment opportunities overseas that are as attractive as the A-share market, especially in emerging counties like Brazil, Russia, India and Vietnam.

And the valuation of equities on these markets is comparatively reasonable, so investors will be able to diversify risks by investing overseas.

In the past, if the A-share market had a correction or slump, investors had to sell stocks to avoid risks.

Now they can put the money into overseas markets and buy other stocks as alternatives. This 24-hour-a-day investment model will bring investors more returns in the long run.

Q: Chinese fund companies have little overseas investment experience. How will ICBC Credit Suisse Asset Management deal with the challenge of investing overseas?

A: We are fully aware of the challenges of overseas markets. You will interact with different peoples, different cultures, different traditions and regulations.

Besides taking the time to study overseas investment, I believe there are two key steps in the approach to QDII:

You must choose a leading overseas firm to help manage the investment and provide consultancy.

Also, it is important to establish an effective communication process between local and foreign firms to make sure the investment satisfies the interests of domestic investors.

ICBC Credit Suisse Asset Management, as a joint venture between the Industrial and Commercial Bank of China (ICBC) and Credit Suisse, has notable advantages. By the end of June we had $1.3 trillion under our management globally.

Credit Suisse has 24 asset management institutions in 18 countries. Its abundant overseas investment experience greatly increases our confidence.

The company also shares its global research database that has information on 18,000 equities around the world.

Q: Which markets will be the first for ICBC Credit Suisse's QDII investment?

A: Our first QDII product has yet to receive approval from the securities regulators, but I can say our investments will be in opportunities related to the high growth of China's economy.

We will mainly invest in two types of securities: mainland equities listed in Hong Kong and public global companies that will benefit from the growth of China's economy.

Q: Why that approach?

A: China's economy for the past 27 years has been growing at an average rate of over 10.5 percent at the same time the average growth rate for the global economy averaged 3.7 percent.

Compared to other emerging markets, such as India, Russia and Brazil, China's proportion of the global economy is higher, some 5.5 percent of the world economy in 2006.

The World Bank predicts that China will surpass the United States to become the world's largest economy by 2050.

Also, there is a large group of mainland companies listed on overseas exchanges such as Hong Kong. These companies have sophisticated corporate governance and a record of sound performance. That is why we will invest in the opportunities of China.

(China Daily 10/22/2007 page4)