China's fund managers are promoting low-risk, high-liquidity products to attract investors as the stock market continues to languish.

Shanghai-based GTJA Allianz Funds, the first fund management joint venture approved in China, started issuing an Absolute Return Fund yesterday.

The fund, a new product introduced from overseas markets, aims to achieve positive returns regardless of the direction of the securities markets.

It targets long-term capital preservation with minimal short-term volatility by investing in a diversified portfolio of equities and fixed-interest securities, company sources said.

Risks are put under strict control by a specialized risk management scheme and the portfolios will be adjusted according to the performances of the equity, bond and monetary markets, said Sun Wei, the manager of the new GTJA Allianz fund, yesterday at a briefing in Beijing.

She aims to allocate 5-65 per cent of the assets of the fund to equity. A minimum 20 per cent of assets will be invested in bonds. Cash and short-term treasury bonds will account for no less than 5 per cent.

The characteristics of the absolute return fund - low risk and stable long-term returns - make it an appealing product while the stock market undergoes a correction, said an analyst at China Merchants Securities, who preferred not to be named, yesterday.

China's mutual fund business has been hit hard by the bearish stock market.

The benchmark Shanghai composite index touched a new six-year-low yesterday, plunging 2.59 per cent to close at 1,070.84, the lowest point since it finished at 1,059.87 on May 18, 1999.

"The index has been moving down for a long time and that has eroded investor confidence," said Qian Hua, vice-general-manager of GTJA Allianz Funds.

"The impact on mutual fund sales is obvious," he said. "It is unlikely we will see the 10 billion yuan (US$1.2 billion) giant funds that once emerged at the start of 2004

." As equity funds are losing popularity among investors, fund managers are turning to less risky products like monetary market funds.

Everbright Pramerica Fund Management, also a fund joint venture in Shanghai, and Shenzhen-based Dacheng Fund Management recently issued monetary market funds.

Robert Horrocks, manager of the Everbright Pramerica monetary market fund, said such vehicles provide a safe harbour for investors when risks are high in the choppy waters of the stock market.

Investors have been expressing interest in other low-risk instruments, such as pension funds and insurers, which are gathering momentum preparing to enter the capital market, he said.

.Source: China Daily