(Yicai Global) Oct. 22 -- China Securities Regulatory Commission issued window guidance to mutual funds last week, generally directing fund firms to limit future applications of fixed-income products, while encouraging the issuance of equity funds, in a move seen as bolstering the stock market to serve the real economy.
Their companies received the CSRC's window guidance on Oct. 18, various mutual fund operators confirmed to Yicai Global.
Overall, the guidance aims to curb the application of debt funds, according to an anonymous staffer who works in the product division of a large mutual fund. All debt and mutual funds which invest in bonds and deal in stock and bond exchange-traded funds can only raise up to CNY1 billion (USD141 million), which is unavailable for subscription within six months after issue, the source said, adding each fund company may only submit six bond products each year and can apply for another product only after regulators approve a previous one and each applicant may only have one under review at a time.
Of the 179 funds available for purchase, some 108 are bond-related, including 76 medium- and long-term ones, while eight are short-term bond funds, 19 are passive bond index funds and five mostly invest in debt instruments, making up 60.3 percent of the total, according to Shanghai-based financial data provider Wind Information.
Funds focusing on China's STAR Market, commodity funds and money market funds whose daily net asset value is calculated via an amortized cost method are also impacted to some extent, Yicai Global has learned.
The watchdog is encouraging equity products, while innovative ones still require peer-to-peer communication with regulators, sources within the fund sector said.
The motive behind the regulator's window guidance is that many bond funds are institutional investor-customized products that do not actually serve the real economy, a vice president at a Beijing-based mutual fund said. The regulator thus hopes to boost China's stock market by pushing equity funds.
Editors: Tang Shihua, Ben Armour