China mutual funds post $13 bln Q1 loss after 09 gain

SHANGHAI, April 22 (Reuters) - China's mutual fund industry posted an 88.5 billion yuan ($12.96 billion) loss in the first quarter, in stark contrast to a record profit in 2009, official media reported, after investors misjudged the country's volatile stock market, one of the worst performing in Asia this year.

Of 60 mutual fund companies, only Morgan Stanley Huaxin Funds and Minsheng Royal Fund Management Co made a profit, the Shanghai Securities News said on Thursday.

China's fund sector, made up of 621 funds, posted a full-year profit of 525 billion yuan in 2009, with funds investing in overseas markets under the Qualified Domestic Institutional Investor (QDII) scheme outperforming.

However, due to global stock market declines early this year, QDII funds lost 362 million yuan in the first quarter, the newspaper said, citing quarterly reports by Chinese mutual funds.

In a boom-and-bust cycle typical of China's nascent stock market, the benchmark Shanghai Composite Index .SSEC fell 5 percent in the first three months of the year as a clampdown on bank credit tightened availability of funds to buy stocks.

China's mutual funds reduced their stock holdings by 3.74 percent in the first quarter, the newspaper said.

Bond funds, which underperformed last year, were a bright spot this year, with money funds also outperforming.

China is particularly keen to build up its mutual fund industry, with this month's launch of stock index futures set to provide a long-term boost to the industry by fostering new investment products. [ID:nTOE63B074] ($1=6.827 Yuan) (Reporting by Farah Master; Editing by Edmund Klamann)