(Yicai) Jan. 8 -- Chinese fund managers are finding it hard to launch new public equity funds, or mutual funds that mainly invest in stocks, as investors’ appetite for risk remains weak. However, here are rumors swirling that China’s securities regulator is asking fund managers to issue more equity funds to revive the ailing stock market.

Of the 10 public equity funds launched in the first trading week of the year, around CNY10 million (USD1.4 million) was raised for each fund, according to Yicai research. And considering that the fund managers promised to purchase no less than CNY10 million themselves, it would appear that these products are being established “out of their own pockets”.

When the stock market is sluggish, it is always difficult to issue new funds whose main investment target is the stock market, a person working at a fund manager told Yicai. Instead, at the moment, low-risk debt-targeted funds with stable returns are investors’ first choice.

There are rumors that the country’s securities regulator is issuing guidance to leading fund companies, asking that for each new fund issued whose main investment target is the debt market, they should also launch four new equity funds to help boost investor confidence.

“It is said that new products need to be declared in a ratio of 4 equity products to 1 bond product,” a person from a large fund company told Yicai. This measure was probably implemented around the end of November last year, he added.

However several other industry insiders told Yicai that the public fund managers they work for have not received any such instructions from the regulator, rather that the China Securities Regulatory Commission is suggesting that fund managers give priority to the launch of equity products.

As new issuances slide, the proportion of equity funds out of all public funds has also dropped. The total size of equity funds, including stock funds and hybrid funds, had shrunk to 24.9 percent of the 11,500 public funds on the market as of Jan. 7, compared to 27.9 percent the same period last year and 57.3 percent 10 years ago.

In contrast, the value of mutual funds targeting debt instruments has climbed to 31.6 percent of the value of all public funds from 11.3 percent 10 years ago, and that of money market funds has jumped to 40.8 percent from 29.3 percent, bringing the combined size of fixed-income funds to more than 70 percent.

On the other hand, although it remains difficult to issue new actively managed equity funds, passively managed equity funds, such as index funds, are hotter than ever, indicating that investors are betting that the market will pick up in the near future. The scale of exchange-traded funds climbed more than 20 percent as of Jan. 7 from the same period last year to CNY1.9 trillion (USD280 billion), according to Wind data.

Editor: Kim Taylor