China Minsheng Banking Corp liquidated a QDII product, the first such product to meet such a fate amid the current sluggish capital market.

Minsheng sold 100 million shares for the QDII product at 1 yuan apiece in October. The product is attached to a Baring (euro) fund in Hong Kong, which has been ranked No 1 in Hong Kong for three consecutive years.

However, with the subprime crisis unfolding, the net value of the Baring fund slumped to its lowest record, spurring the liquidation of Minsheng's QDII product.

According to Minsheng's issuance agreement, the QDII product would have to be liquidated when assets fell below 50 percent of their initial value.

On March 19, Minsheng announced it was liquidating the QDII product and would repay the investors. The personal threshold of this QDII fund is 100,000 yuan, which means the minimum loss of each investor amounts to about 50,000 yuan.

The bank also gives the investors another choice - that of keeping their investment in the Baring fund. Reluctant to bear the losses, most investors seem to prefer keeping the investment.

The issuance agreement said maximum yield that the investors can expect is 18 percent, but the actual performance has been much worse. From Oct 31 to the end of last year, the highest yield of Barings fund was 0.73 percent, a proof that the QDII product remained sluggish ever since it was launched.

Minsheng's QDII product is actually not the only one sinking. Many QDII products are going the same way, with net losses raging from 15 percent to 40 percent. The QDII product released by the Bank of East Asia is said to be running at a 60 percent loss but hasn't met the liquidation bottom line yet.

Besides QDII products in the banking system, QDII funds themselves are also suffering huge losses. Till the end of last week, the highest net value of QDII funds was 0.76 yuan, below 1 yuan, the value set for fund subscriptions.

As early as 2005, the China Banking Regulatory Commission stipulated the banks evaluate investors' ability to bear risks. Furthermore, risk reminders were required to be highlighted on product manuals and agreements, especially for the disadvantaged and the elderly.

(China Daily March 28, 2008)