Qfii And China's Securities Investment Fund Performance Comparison Research

Since being the member of WTO in2001, China began to open its capital market to foreign institutional investors. Then QFII-Qualified Foreign Institutional Investors as a transition system came to China in2002. Nearly10years passed, QFII has been one of the important investment institutions in Chinese capital market. With long investing history and most professional analysts are QFIIs advantages. While, they challenged by China local investment institutions, such as Domestic Fund and other financial institutions. Their Chinese rivals are more familiar with China national conditions and regulations. So how will they perform in Chinese market? Will they beat domestic fund? These questions lead me to study this topic of "Study the performance difference between QFII and Domestic Fund."Firstly, I introduce the history of Chinese QFII, and compared QFII with Taiwan, South Korea and India. Since above mentioned emerging economic entities approved QFII several years ago. Their experience can give some help to Chinese QFII.Secondly, my main task is to summarize the difference of return between QFII and Domestic Fund from the year2006to2011. I collect the average monthly rate of return of QFII and Domestic Fund from the year2006to2011as research data. Based on the SH Index movement, I define the9years into bull and bear market phase. According to statistic result, the performance of QFII and Domestic Fund showed significant differences in bull and bear phases. In the bull market, QFIIs gained less earnings than Domestic Fund, take the time2006to2007for example. However, when the whole market suffered financial crisis and changed to bear market, then QFIIs outperformed than Domestic Fund. Even the two institutions contracted their profit and turned out to loss result. Domestic Fund lost more than QFIIs. According to the empirical study, I claimed that in different market phases, QFII and the Domestic Funds have different performance. In the long run, they showed the same trend with the SH Index. The next part, I try to explain the above performance difference from two parts. Different financial instruments will bring different returns. Based on investment strategy, I try to explain the above phenomena from what special stocks they have chased. And t what special features the stocks that they long hold have. According to relative ownership ratio in the portfolios they hold, I selected top70high ratio stocks as study samples in every quarter from2005to2011. In order to find the company characteristics, I use10financial indications to tell the investment preference. Then, the relative ownership ratio as independent variableand the11financial indications as dependent variables are adopted to do multiple regulations. The empirical study pointed that QFII and the Domestic Fund adopted different investing strategy and selected different kind of stocks as portfolios.Another reason may explain their different performance is the different trading strategy they have used. Study the year from2005to2007, QFII prefers constrain strategy then momentum strategy. Contrary, Domestic Fund adopted momentum strategy more time than constrain strategy. While, the momentum index M shows that Domestic Fund depend more on each kind of trading strategy in the stock market from the year2005to2011. At last, based on the above discussions, I draw my conclusions and put forward further studies.