Sizzling Fund Market

The assets of China's booming mutual fund market surged to a record high in 2006, according to an industry report from Lipper, a fund-analyzing agency under Reuters.

The assets of several types of mixed funds-investment funds that include both equities and bonds-jumped between 95.15 percent and 124.74 percent in 2006, the report said.

The whopping growth rate-well above the global average-was fueled by the bullish stock market that broke out of its four-year slump last year, the report said. The major stock indices-the Shanghai Composite Index and Hushen 300-rocketed 130.43 percent and 120.02 percent, respectively, last year.

The total market value of mutual funds rose 83 percent from $60 billion at the beginning of 2006 to more than $110 billion by year-end, according to figures released by Z-Ben Advisors, a research institute.

But Zhou Liang, a senior Lipper research analyst, warned fund investors to beware of the risks involved as huge amounts of capital flood the market.

Stronger Currency

A report by the research institute under the Ministry of Commerce predicts the Chinese currency will gain 9 to 10 percent against the U.S. dollar this year. Since the government reformed the foreign exchange rate system in July 2005, the renminbi (RMB) has appreciated 5 percent. The value of the RMB against the U.S. dollar hit a new high on January 15 with a central parity rate of 7.7938 yuan to $1.

The report says the continued, progressive and moderate appreciation of the RMB would help to moderate China's gaping trade surplus, which hit a record $177.47 billion in 2006, an increase of $75.59 billion from the previous year.

The report acknowledges that the RMB has been undervalued. In the long haul, the Chinese currency will continue an upward trend. However, the report points out, the appreciation should be moderate, controllable and progressive, subject to no sharp fluctuations.

Overseas Listing Dampened

The government will not approve the establishment of agencies in China by overseas stock exchanges before regulations on the management of the business are made, a senior securities regulatory official said on January 13.

The country is mulling measures to regulate overseas bourses' agencies in the country, Tu Guangshao, Vice Chairman of the China Securities Regulatory Commission, said.

Applications by overseas stock exchanges to set up agencies in China will be examined and approved only after the regulations come out, Tu said without elaborating.

Earlier reports said that China has approved applications by the New York Stock Exchange and the Nasdaq Stock Market.

Stock exchanges from the United States, Britain, Singapore and South Korea have launched a series of promotions in China in recent years, encouraging local enterprises to go public there.

However, analysts worry that overseas listings by domestic companies, especially those reporting an outstanding performance and with high growth potential, will slow the growth of China's capital market.

Gold Rush

Chinese investors traded enthusiastically in gold last year, according to the latest figures from the Shanghai Gold Exchange.

Information from the exchange, which began operating in October 2002, shows that in 2006 turnover in the precious metal reached 194.75 billion yuan, up 82 percent from 2005.

A total of 1,250 tons of gold were traded, up 38 percent year on year. Higher gold prices have boosted trading volumes.

Spurred by spiking international gold prices, the domestic gold price rose from 130 yuan per gram at the beginning of 2006 to a peak price of 200 yuan per gram in the middle of the year.