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China's QDIIs feel pain from global stock slump

Xinhua Financein CFBOND
2018-10-12 09:46

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The broad-based slump of the global securities markets this month is draining profits and value from China's outbound institutional investors, according to a report by China Securities Journal on Thursday.

In October, multiple factors had combined to drive down major stock indexes across the world, with the NASDAQ Composite and Hang Seng Index slipping by 3.21 percent and 4.38 percent respectively in the first five trading days.

The impacts of this global tumble are felt among China's Qualified Domestic Institutional Investors (QDIIs). These financial institutions saw an end to the period of boom as seen in the past three quarters, which once provided an average return of 2.99 percent.

For the period from Oct. 1 to Oct. 8, the average return of Chinese QDII funds had dived all the way to a negative 2.97 percent, statistics from China's leading financial data provider Wind revealed. This negative figure plunged the previous 2.99 percent performance to 0.45 percent on Oct. 8.

Along with the crash in profitability, these ODII funds' net asset value (NAV) has diminished too.

QDII funds targeting Hong Kong-listed stocks suffered the most, seeing an NAV drop that once reached a high of 10.58 percent. Several others tracking the S&P 500 Index and the NASDAQ-100 saw their NAV down by over 5 percent and 3 percent respectively.

Amid this gloom, QDII funds eyeing crude oil and agriculture have been faring relatively well, with 12 of them enjoying an over 1 percent increase in their NAV.

While Chinese QDII funds may continue to face pressure on their performances, the outlook laying ahead for them may vary as the specific markets experience changes, said experts.

For crude oil, the prices are unlikely to rise further and may face downward pressure in the short term, considering the call for the Organization of Petroleum Exporting Countries (OPEC) to increase production.

In Hong Kong, after its interest rate went up in September, the Hong Kong dollar is under less pressure against the U.S. dollar and the six months of adjustments in the Hang Seng Index have now rendered a higher margin of safety.
 
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