Chinese regulators are likely to take their time approving the 50-plus new mutual funds that are awaiting their approval, sources tell Reuters. Regulators are afraid investors will sock large sums of money in the new offerings, driving up the value of the market.
This is causing some concern among fund managers, who are anxious to bring new offerings to market.
The China Securities Regulatory Commission reportedly sent a letter to fund companies last month, letting them know that approval for new products might take longer than the usual two or three months but that they should be patient. The Commission also stressed that fund companies must make it clear to investors when selling fund shares that there are inherent risks in investing in the market.
“Obviously, now the regulator is not worried about how much further the benchmark stock index can climb but is worried about how it can cap the speed of the climb before the market becomes overheated,” a source said. China’s benchmark index rose 130% in 2006.
“The demand for new fund issuance so far this year is much stronger than regulators had expected,” the source added. “After the freeze at the beginning of this year, it is even harder for regulators to make approvals at their usual pace.”