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Bond funds excel in 2008 as stocks plunge, bank interest rates drop

CHINA'S bond funds achieved higher returns than most stock-invested funds last year, as investors sought safer tools when the global financial crisis resulted in stock plunges and interest rate cuts.

Altogether 25 bond funds calculated by the China Galaxy Securities Company Ltd. fund research center enjoyed an average earning rate of 6.52 percent in 2008, according to a report the center issued earlier this month.

In contrast, 124 stock funds suffered heavy losses as their average return rate stood at -50.6 percent, according to the report.

In 2008, China's stock market experienced the worst performance in history, with the benchmark Shanghai composite index plummeting nearly 70 percent.

The report said 16 index funds, which tracked the movements of stock indices in buying and selling securities, saw the lowest average return rate of -62.6 percent in 2008.

Losses were also recorded for most of hybrid funds, whose return rates ranged from -24.8 percent to -49.8 percent.

More investors turned to the bond market to avoid risks while lower interest rates drove bond demand even stronger, leading to relatively high returns for bond investment, said analysts.

In a move to stimulate economy, the central bank cut benchmark interest rates by five times in three months from September last year.

As of the end of 2008, China had 464 mutual funds, with a combined net value of 1.89 trillion yuan (about US$277 billion).


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