Public funds rebound from losses in H1

China's public funds recorded huge surges in their profitability in the first half of this year due in large part to the country's strong bond market and solid gains in certain sectors of the domestic equity market, yet a return to overall losses may be in store for these funds during the second half, according to analysts.

China's 970 public funds earned a total of 99.756 billion yuan ($15.66 billion) in the first six months this year, according to data issued Tuesday by TX Investment Consulting Co Ltd, citing recently released earnings reports from these funds.

These results stood in stark contrast to the 125.43 billion yuan and 374.99 billion yuan in losses the funds recorded in the first and second halves of 2011 respectively, according to figures from TX Investment.

From January through June of this year, stock funds recorded a combined 50.83 billion yuan in profits, more than any other type of fund.

Their large profits derived from robust gains in bio-pharmaceutical and liquor stocks, which outperformed the mainland's ailing stock markets during the same period, Zhang Bingwen, a public fund analyst from Z-Ben Advisors, a Shanghai-based consultancy, told the Global Times.

Soaring returns from China's debt market helped bond funds rack up 8.85 billion yuan in profits over the first half, making these funds the third most profitable during the period, said Zhang.

Mixed funds, money market funds and principal guarantee funds gained 24.14 billion yuan, 8.05 billion yuan and 1.55 billion yuan respectively during the half, according to figures from TX Investment.

Yet, as concerns about China's slowing economy buffet stocks and the bond market starts to retreat due to tightening liquidity pressures, the large gains public funds realized in the first half are unlikely to carry over into the second half.

Near-constant drops in local shares since May are already weighing on stock funds, Qiu Yanying, TX Investment's chief strategist, told the Global Times.

"Given the current market climate, second half losses many wipe away all of the earlier gains," said Qiu.