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China IPO Funds Threatened as Regulators Mull Share Sale Ban

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China’s consideration of a suspension on initial public offerings is threatening hybrid funds that rely on them to boost returns.

The open-ended funds typically buy short-term debt and are also allowed to purchase equity, which they do after winning allocations in lotteries for IPOs. Almost all companies going public this year have jumped by the 44 percent limit on the first day, compared with the 3.5 percent yield on AAA commercial paper. While that helped boost fund returns to more than 10 percent annualized in the first half, any IPO suspension would drag down their performance, Huachuang Securities Co. says.