UPDATE 1-China's Yinhua to launch $2 bln QDII fund -source

(Adds details, background)

By Helen Ding

SHANGHAI, April 10 (Reuters) - China's Yinhua Fund Management Co plans to launch a fund for subscription on April 21 to raise up to $2 billion for investments in global capital markets, a company source said on Thursday.

This would be the seventh such fund to be launched by a domestic fund house under the country's Qualified Domestic Institutional Investor (QDII) scheme -- aimed at giving domestic residents more investment opportunities and promoting a better balance in China's international payments.

A roadshow has started in major Chinese cities, the source told Reuters, adding that the firm had received regulatory approval to raise up to $2 billion for the product.

A company spokewoman confirmed that Yinhua was preparing to launch a QDII fund -- which will invest no less than 60 percent of its proceeds in overseas mutual funds and target both developed and emerging markets around the world.

Yinhua, which had a total of more than 90 billion yuan ($12.85 billion) in assets under management at the end of 2007, has said it had hired Morgan Stanley (MS.N) and SEI Investments (Europe) Ltd as its investment advisers for the QDII fund.

Critics said any new QDII funds would be a hard sell right now because of uncertainties in the overseas capital markets as a result of the U.S. subprime debt crisis.

Four major QDII stock funds from Chinese mutual fund firms that raised $4 billion each from domestic investors late last year have fallen sharply below their par value amid a turmoil in the global financial markets.

They saw an average fall of 9.6 percent in their net asset value per unit in March. The QDII fund of JPMorgan (JPM.N), for example, has lost about 30 percent in its NAV per unit.

Societe Generale's (SOGN.PA) China fund unit launched a QDII fund for sale last month, but had not yet raised the targeted $3 billion. This is a far cry from late last year, when the four major QDII stock funds were snapped up by domestic investors.

ICBC Credit Suisse Asset Management Co, Credit Suisse's (CSGN.VX) China fund venture, said early this year that it had raised just 3.15 billion yuan for its QDII stock fund, against a previous target of $3 billion. ($1=7.001 Yuan) (Editing by Ken Wills)