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ICBC raises $585m in China's largest QDII fund

(Bloomberg)
Updated: 2007-07-03 08:18

Industrial & CommercialBank of ChinaLtd., the nation's biggest financial services company, raised 4.45 billion yuan ($585 million) for the country's largest fund that allows local investors to buy securities abroad.

Industrial & Commercial, also known as ICBC, completed the sale of China's first equity fund under the qualified domestic institutional investor (QDII) program on June 29, the Beijing-based bank said in a statement today. It plans another fund specializing in stocks abroad this month.

China has struggled to attract money under the QDII program because its soaring stock markets make investment abroad less attractive. Chinese investors are opening brokerage accounts at a rate of about 300,000 a day this quarter, helping the CSI 300 Index to the second-biggest gain among 90 benchmarks tracked by Bloomberg.

The CSI 300 is valued at 41 times the reported earnings of its member companies, about twice as much as indexes in Japan and India, Asia's next most expensive markets.

Banks were allowed to invest in overseas shares from May 14, extending from fixed-income and money-market products previously, as the government tried to cool the local stock market by diverting funds elsewhere.

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ICBC's open-ended fund will invest half of its assets in China-related stocks in Hong Kong and the other half in high-yield bonds and money-market products across Asia to hedge against appreciation of the yuan, the bank said.

Investors must put in at least 300,000 yuan into the fund. JP Morgan Fleming Investment Management Inc will help the Chinese bank manage the portfolio.

Banks need to offer more investment products to bolster fees and reduce their reliance on lending, Li Fuan, director of product innovation at theChina Banking Regulatory Commission, said in June. About 40 percent of China's household savings is held in bank deposits, with people saving for retirement, health care and education, and about the same is held in investment and insurance products in more developed markets, he said.

Of the $15 billion in QDII quota allotted since the program started a year ago, only 6 percent has been filled, according to the banking regulator. ICBC has been granted a quota of $2 billion.