Influenza scare hits QDII investors but may pass soon

The spread of A (H1N1) virus, initially known as the swine flu, has hurt Chinese investors' hopes for a rebound in the value of wealth management products at Chinese banks.

Chinese investors are able to access overseas securities markets through wealth management products offered by banks under the qualified domestic institutional investor (QDII) scheme. But more than half of the QDII products offered by banks have losses of over 50 percent since the financial crisis broke out last year.

Although the pickup in global markets in recent weeks has given Chinese investors some slim hope, the global A (H1N1) virus outbreak sent financial markets around the world tumbling again.

The Dow Jones Industrial Average in the US was down 79 points, or 1 percent, to 7996 on April 27. On the same day, the Nasdaq Composite Index fell 1 percent to 1677 and the S&P 500 went down 1.3 percent to 855.37, led by declines in basic materials and energy.

The Dow Jones Transportation Average recently also fell over 5 percent to 97.18 as participants bet on a slowdown in global travel.

The MSCI World Index in Europe dropped for the first time in five days, slipping 0.6 percent in London on April 27. It had previously rebounded 27 percent since March 9 as companies from American Express Co and Ford Motor Co to Italy's Eni SpA posted earnings that beat analysts' estimates.

Europe's Dow Jones Stoxx 600 Index also fell 1.3 percent on the same day, led by travel and leisure companies, while the MSCI Asia Pacific Index slid 0.4 percent, reversing an earlier advance of 1.4 percent. Futures on the Standard & Poor's 500 Index dropped 1.9 percent.

As a result, the value of QDII products offered by Chinese banks also plunged.

According to figures from Chinese financial consulting firm Benefit Wealth, about 70 percent of the existing 338 QDII products saw their value plummet in the last week of April.

The 49 QDII products with terms of six months to one year recorded an average loss of 28.76 percent by the end of April. And for the 289 QDII products with a term of over a year, the average loss was 38.11 percent at the end of last month.

"Concerns over the spread of A (H1N1) virus around the world definitely played an important role in the declining value of QDII products," said Zhang Xing, a researcher from Benefit Wealth.

But relief for Chinese investors, as well as those concerned about a potential outbreak, may be at hand.

The A (H1N1) virus appears no more dangerous than the regular flu virus that makes its rounds each year, a US official said on May 4.

"What the epidemiologists are seeing now with this particular strain is that the severity of the flu - how sick you get - is not stronger than regular seasonal flu," Homeland Security Secretary Janet Napolitano said.

European finance ministers were also quoted as saying that they saw no evidence of the A (H1N1) virus hurting the European economy.

Jean-Claude Juncker, the Luxembourg Prime Minister who chairs monthly meetings of finance ministers from the 16 nations that use the euro currency, said scientific evidence suggested the flu outbreak's impact was manageable.

(China Daily 05/11/2009 page4)