China Merchants Fund to launch BRIC QDII fund: Sources

China Merchants Fund Management Co plans in January to launch the country's third fund in a month to invest in BRIC markets, two people familiar with the plan said on Tuesday. 

The move reflects a trend among Chinese fund managers to diversify portfolios to other fast-growing emerging economies, such as the BRIC grouping - Brazil, Russia, India and China. 

The listed index fund (LOF), to be launched under China's Qualified Domestic Institutional Investor (QDII) scheme, will invest in stocks in the S&P BRIC 40 index.    

The fund would be launched soon after an announcement next week, said the sources, declining to be identified because the information is not yet public.  

"BRIC funds would enable Chinese investors to diversify their portfolios globally without having to give up relatively high returns from investing in emerging markets," said Zhang Haochuan, analyst at Shanghai-based fund consultancy Z-Ben advisors. "It shows that China's fund industry is becoming more sophisticated, and their products increasingly more attractive and competitive."  

Chinese fund houses are rushing to sell QDII products this year even as yuan appreciation makes overseas investment products harder to sell. As a result, Chinese fund managers are becoming more creative, having launched the country's first gold fund, index fund and commodity fund under QDII this year.                                           

Merchant Fund's new QDII product follows the heels of two other funds launched this month that also invest in BRIC markets.                                           

Citic-Prudential Fund Management Co, the Chinese venture of British insurer Prudential Plc, launched an equity fund that buys mainly BRIC stocks, while China Southern Fund Management Co launched an index fund that tracks the FTSE BRIC 50 Index.                                           

The S&P BRIC 40 index, which Merchant Fund''s new product will track, is a basket of 40 leading stocks that represent the biggest and most liquid companies in Brazil, Russia, India and China.                                           

They trade in developed stock exchanges in Hong Kong, London and New York.