Merrill Lynch would become the first foreign institution to list a mutual fund on China's exchanges as it begins selling a new investment product to domestic investors this week, it said Tuesday.

The U.S. giant's asset management venture with Bank Of China International will begin selling its first fund Thursday, to be listed on the Shenzhen Stock Exchange in the first quarter of 2005 - only the country's second listed open-ended fund, or LOF.

Merrill Lynch, which manages assets of about US$500 billion worldwide, set up its mainland venture in July to try to tap US$1.3 trillion in personal savings by Chinese investors.

Analysts say the fund could generate interest simply because of its novelty. Investors can either trade listed open-ended funds like regular stocks on an exchange, or redeem invested cash as with a regular mutual fund.

The country's fund industry is booming. More than 90 billion yuan had been raised through funds in the first six months, bringing domestic assets under management to US$25 billion.

Analysts expect that to surpass US$36 billion by end-2004.

That growth has lured a host of foreign firms, such as American International Group, in addition to pioneers ING , Societe Generale and Allianz .

But the pace of expansion slowed during a seven-month slump during which stock markets shed a quarter of their value, as the government stepped up efforts to curb investment.

Merrill owned 16.5 percent of the venture, called BOC International Investment Managers. It would have to sell a minimum 200 million yuan (US$24 million), mainly to Chinese investors, to launch a fund, its joint venture said in a statement.

But foreign investors that had won special access to the main stock and debt markets - under a landmark Qualified Foreign Institutional Investor scheme that kicked off in 2003 - were also eligible to buy into the fund, Merrill added.

BOC International Holdings Ltd., the investment bank of Bank of China, the country's top foreign exchange lender, owns 67 percent of the venture. Hong Kong-listed BOC (Hong Kong) owns the remaining 16.5 percent.

China Southern Fund Management Co. Ltd. launched the first listed open-ended fund in August, raising 3.54 billion yuan.

Source: Shenzhen Daily