UPDATE 2-China approves new mutual funds to support stocks

Fri Feb 15, 2008 5:50am EST

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By George Chen and Michael Qu

SHANGHAI, Feb 15 (Reuters) - China's securities regulator has approved the creation of at least three new mutual funds to raise more than 20 billion yuan ($2.8 billion), in an apparent effort to support the sagging stock market, sources said on Friday.

It is the second time in a month that Beijing has approved new funds to bolter the battered stock market.

China's benchmark Shanghai Composite index .SSEC has fallen by more than 25 percent since peaking in October last year, hit by sliding global markets and concern about heavy new supplies of domestic shares.

"The government knows the current level (of the stock index) is a key level to be supported. Otherwise, you will see more investors losing confidence in the Chinese stock markets," said a fund manager at a Sino-foreign fund house in Shanghai.

The asset management arm of Bank of China (601988.SS: Quote, Profile, Research, Stock Buzz) (3988.HK: Quote, Profile, Research, Stock Buzz) had won approval from the China Securities Regulatory Commission (CSRC) to raise roughly 10 billion yuan ($1.4 billion) to focus on domestic stocks, two fund industry sources who had been briefed on the situation told Reuters.

SPDB AXA Fund Management Co, a fund venture between Shanghai Pudong Development Bank (600000.SS: Quote, Profile, Research, Stock Buzz) and French insurer AXA (AXAF.PA: Quote, Profile, Research, Stock Buzz), had also won approval from CSRC to raise up to 7 billion yuan for a new fund to invest in Chinese stock markets, said the sources, who declined to be identified before an official announcement.

Bank of Communications Schroder Fund Management Co, a joint venture between Bank of Communications (3328.HK: Quote, Profile, Research, Stock Buzz) (601328.SS: Quote, Profile, Research, Stock Buzz) and UK asset manager Schroders (SDR.L: Quote, Profile, Research, Stock Buzz), won CSRC approval to raise roughly 5 billion yuan for a bond fund, the sources added. Continued...