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China regulator tells fund managers to keep quiet

SHANGHAI, July 25 (Reuters) - China's securities regulator has ordered fund managers to refrain from making public comments about the benchmark index's .SSEC loss of more than half its value from its October peak, according to a notice distributed to fund houses.

China Securities Regulatory Commission, China's securities industry watchdog, issued the notice dated July 24 to the country's fund houses, including joint ventures with foreign banks such as HSBC Holdings Plc HSBA.L0005.HK and JPMorgan JPM.N, to order fund managers to be careful when making public comments.

“We want to remind all the fund companies to strengthen your management of external comments to produce and maintain the good image of the fund industry,” the CSRC said in the notice obtained by Reuters on Friday.

“To those who disobey the rules or have (negative) social impact, those companies should take responsibility for the results,” the CSRC warned.

The notice didn’t indicate whether the rules to control fund managers’ comments would be permanent or temporary, but two senior executives at major fund houses told Reuters that they believed the rules were intended for the period of the Beijing Olympics, from Aug. 8-24.

“Stability is the top priority to the regulator and everything that the regulator does is just for the sake of a harmonious and successful Olympic games,” said one of the two fund executives.

“It’s China and the Olympics, so we very much understand the regulator’s decision,” he added.

The two fund executives declined to be identified due to the sensitive nature of the notice.

The regulator also ordered fund houses to obey the following rules, according to the notice:

-- Not to give public comment on the trend of stock indexes and specific industries and stocks.

-- Not to comment on the investment portfolios and operation of fund investments.

-- Not to comment on non-public information.

-- Not to express opinions that may affect the image of China’s fund industry.

-- Not to give comments that may do harm to the development of China’s fund industry.


The regulator also warned that it had discovered some fund companies and their staff lacked “considerate thoughts” and were not “very careful of the words and phrases” when they commented in recent interviews with media, although the CSRC did not cite any specifics.

As a result, the CSRC said fund houses should pay special attention to press releases and media events, which it said the relevant government agenies will review periodically.

Most stock-focused mutual funds made huge losses in the first half due mainly to sharp declines of domestic stock markets amid growing concerns about the U.S. credit crunch and yuan appreciation, which could slow China’s economic growth.

Some individual investors have raised questions about the abilities of some Chinese fund managers, most of whom have less than 10 years of industry experience but who are sometimes responsible for more than 10 billion yuan ($1.47 billion) of assets.

Many fund managers often blame the poor global economic environment, high oil prices and a lack of regulatory efficiency for any sharp declines in domestic stocks.

“The market is not short of money but investors’ confidence,” said the second fund executive.

“Obviously, the regulator is now trying very hard to boost investors’ confidence on the hope that the market can rebound if everyone feels confident of the future,” he added. ($1=6.824 Yuan) (Editing by Ken Wills)