China's burgeoning capital market will be optimized to facilitate the expanding fund industry, a top securities regulator said yesterday.

To ensure the healthy and stable development of the fund industry, "we will firstly attach importance to the co-ordinative development between the fund industry and capital market," said Shang Fulin, chairman of the China Securities Regulatory Commission at the annual China Securities Investment Funds Forum International in Shenzhen.

The improvement will be made in terms of structure, product mix, quality of listed companies and the structure of institutional investors, he said.

Compared with the sluggish stock market in China, the fund industry saw more active performance this year.

Statistics show the funds raised some 173.4 billion yuan (US$20.89 billion) during the January-November period of this year, which was the sum of the previous five years.

In the first three quarters this year, stock funds that started investing by the end of last year saw net assets value growing 2.85 per cent, 9 per cent higher than the Shanghai composite index.

Meanwhile, fund products have been diversified from bond funds to the recently successfully run Listed Open-ended Fund (LOF) and the first Exchange-traded Fund (ETF) that has been issued.

However, the funds did not have many choices when investing in the stock market. "As some surveys show most of the fund managers selectively invest in a small group of 200 stocks out of the total of about 15,000. They could not take the risk to invest in the rest because of their low quality," a fund manager surnamed Ma told China Daily.

Zhu Congjiu, president of the Shanghai Stock Exchange said it plans to launch a short-selling system and a stock index future system to enable investors to gain profits.

But before they are implemented, they must get consent from the central government. Ye Yunying, president of Guangzhou-based E Funds Management Co Ltd, a leading fund management company, told China Daily the development of the fund industry also lies in the flexibility of the organizing structure.

(China Daily December 10, 2004)