China inaugurates first bank-invested trust company

(Xinhua)
Updated: 2007-10-29 06:39

Wuhan — China’s first bank-invested trust company is officially set up in Wuhan, capital of central China’s Hubei Province, on Sunday.

The new trust company is held by the Bank of Communications (BOCOM), China’s fifth largest lender, and Hubei provincial finance department, which control 85 percent and 15 percent of the total shares respectively.

The BOCOM invested 1.2 billion yuan (about US$160m) to buy the shares of the Hubei international trust and investment company, the first commercial bank investment in a trust company approved by the China Banking Regulatory Commission.

Jin Dajian, chairman of the new company named “jiaoyin-guoxin”, or BOCOM-International Trust, said the company would focus on “professional wealth management”.

Jin called the establishment of the new trust company “a breakthrough for China’s trust industry”, given that the country’s law on commercial banks, effective since 1995, did not allow commercial banks to make trust investment.

The regulation was not lifted until the end of last year, when the China Banking Regulatory Commission encouraged financial institutions, including commercial banks, to acquire trust companies.

The BOCOM, a large state-owned commercial bank, was established in 1908, and the Hubei international trust investment company was founded as a non-banking financial institution under Hubei provincial government in 1981.

(For more biz stories, please visit Industry Updates)

 

Bank president: Subprime ‘won’t hurt’ CCB

China Construction Bank (CCB) said its revenue won’t be affected by the US subprime crisis as it has only a small amount of US mortgage-backed securities.

CCB, one of the Big Four State-controlled banks, held US$1.06 billion worth of US mortgage-backed and related bonds at the end of June, accounting for 2.75 percent of its total investment in foreign exchange bonds, it said in its interim report yesterday.

“CCB did have a loss from the investment if calculated at the current market value of the securities,” said Zhang Jianguo, president of the bank. “But the loss is not significant enough to seriously affect revenue and is well within CCB’s capacity to bear.”

Zhang said the bank held US$460 million in US subprime mortgage-backed bonds, accounting for less than half of its total investment of $1.062 billion in US mortgage-backed and related bonds.

He said the US securities it held had high credit ratings of A or above and more than 80 percent were rated AAA.

Analysts said the high ratings of its securities exposed the bank to low risk from the credit crisis.

CCB, which posted a 47.5 percent increase in net profit for the first half, said yesterday it had set aside US$180 million for potential losses.

Its net profit rose to 34.25 billion yuan for the January-June period, up 11.03 billion yuan over the same period last year, the bank said yesterday.

“If the US subprime mortgage market situation becomes more serious in the future, CCB will consider increasing the capital in provision,” Zhang said.

A meltdown in the US subprime mortgage market triggered a global credit squeeze that has roiled markets over the past few weeks.

The Industrial and Commercial Bank of China said its subprime mortgage-backed and related securities were valued at US$1.23 billion by the end of June, accounting for 0.3 percent of its total securities investment and 4.32 percent of its foreign exchange investment portfolio.

 

China’s inflation to surpass 3% for full year

This year’s consumer inflation is likely to exceed the central bank’s target of 3 percent, a top official said yesterday.

“Given the relatively high inflation in the first seven months of the year, even if we step up control measures now, the consumer price rise will still probably be above 3 percent for the whole year,” Su Ning, vice-governor of the People’s Bank of China (PBOC), told a news conference in Beijing yesterday.

“The central bank is paying close attention to changes in prices and will take further macroeconomic control measures to keep prices stable,” Su said.

Spurred by surging food prices, the consumer price index, a key gauge of inflation, hit a 10-year high of 5.6 percent in July, up from 4.4 percent in June. The average inflation in the first seven months rose 3.5 percent year on year.

Food prices, which make up about a third of the inflation basket, rose 15.4 percent year on year last month. Prices in the first seven months rose 8.6 percent from the same period last year.

In a report to the Standing Committee of the National People’s Congress, Ma Kai, minister of the National Development and Reform Commission (NDRC), said the government will take a slew of measures such as encouraging pig raising and increasing grain and vegetable supplies, to curb inflation.

“The government will also strengthen monitoring of prices and step up efforts to crack down on price cartels and illegal price rises,” the minister said.

In an effort to curb inflation, the central bank last week raised interest rates for the fourth time this year. The benchmark one-year deposit rate is now 3.6 percent while the one-year lending rate is 7.02 percent.

“I expect the central bank to raise interest rates for the fifth time at the end of October,” Li Zhikun, senior analyst at China Investment Securities Co Ltd, told China Daily.

Li estimated inflation in August to be above 6 percent due to the continuing rise of food prices, and forecast that inflation for the full year will likely to be around 4.2 percent.

Jun Ma, China economist at Deutsche Bank in Hong Kong, also estimated August inflation at round 6 percent; and believes the likely timing of the next rate hike will be in the second half of September.

 

China Reforms Export Tax Rebate System

       China on Monday issued a new plan to reform the export tax rebate system so as to relieve the heavy burden on government coffers.

　　Since 1985, China has adopted tax rebates for exporting enterprises. The central government paid back a certain proportion of the consumption taxes and value added tax (VAT) to the enterprises after they paid taxes for exported goods. The tax rebates were allowed by rules of the World Trade Organization and widely adopted by many WTO members.

　　In recent years, however, with the rapid growth of China’s exports, government revenues have failed to keep up with the tax rebates owe. This has affected the normal operations of export-oriented enterprises.

　　Some experts attribute the failure to the unreasonable export tax rebate mechanism, saying it fails to meet the needs of industrial restructuring and that the volume of the rebates has grown far beyond the capacity of central government finances.

　　“The more rapidly exports grow, the heavier the financial burden on the government finances becomes,” Chine Premier Wen Jiabao said recently.

　　Under the reform plan, the export tax rebate mechanism will be continued, but the refund rate will be lowered. In terms of exports that China does not promote, such as crude oil, the government will reduce the tax rebate rate by a large margin or even abolish refunds.

　　The new plan also guarantees that increases in central import duties will be used on export tax rebates. Local governments will shoulder some fiscal burdens with the central government in this regard, the plan stipulates.

The plan guarantees payments to export enterprises and payment of old debts with interest.

　　Many Chinese export enterprises have long complained about the large amount of tax rebate that is owed by the government. Some small enterprises even went out of business due to financial difficulties while waiting for the rebate.

　　Recently, foreign-funded enterprises in China have also faced serious problems, which affect their international competitiveness and discourage further investment, said an official with the Ministry of Commerce.

　　After the reform, the rebate rate will be lowered, but the refund will be guaranteed and no new debt will be owed by the government, said the official. Heavy financial burdens on export enterprises will be eased and Chinese exports will be promoted, he said.

　　In 2002, China’s central financial deficit reached 309.687 billion yuan (37.3 billion US dollars), while export tax rebates amounted to 115 billion yuan, 15 percent over the allocated budget.
Source: http://bjyouth.ynet.com/article.jsp?oid=2678656&pageno=2

 

China’s financial reform successful: Howard Davies

By Li Zengxin (chinadaily.com.cn)
Updated: 2007-07-06 17:23

China’s financial reform has been successful in the past four years, said Sir Howard Davies in a speech on his China tour this week. But there are remaining problems, such as a high dependency on bank deposits and a small scale of the financial market. The deeper the reform goes, the more difficult tasks it will face, Davies said.
Davies, director of the London School of Economics and Political Science (LSE), and former deputy governor of Bank of England, was on a tour of Beijing this week and made a speech on China’s financial reform at the LSE alumni event on July 2.

After the speech, the advisor to China’s banking and securities regulators talked more of his view on China’s economic development, in an exclusive interview with www.chinadaily.com.cn.

Davies believes the country’s efforts towards reforming the state commercial banks were successful. He said the public listings by three of the Big Four banks – the Industrial and Commercial Bank of China, Bank of China and China Construction Bank – helped them introduce strategic investors, load off burdens from non-performing loans (NPLs) and upgrade internal management.

“The strategy is correct,” Davies said. “In the past, no one hears about Chinese banks, (but) now they are on top of the world’s largest bank list in terms of assets and competing with first-class global banks.”

Davies also noted that the deeper reform goes, the harder missions it will need to accomplish, referring to the Agriculture Bank of China, the last of the Big Four yet to complete a reform, with the largest nation-wide network and the highest NPL ratio.

China’s securities brokers are much weaker than the banks and there is still a long way to go in the reform, said Davies. Reshuffling by mergers and acquisitions are under way, and the China Securities Regulatory Commission (CSRC) is stepping up efforts in supervision of the industry. “China needs to develop its derivatives market,” Davies said.

On China’s heated stock market, Davies said the regulators, especially the China Banking Regulatory Commission (CBRC) and CSRC, need to be particularly “vigilant” on bank loans entering the stock market. They must prevent such incidents, Davies said.

Asked about how the country may curb bubbles in the stock market, Davies said in fact there is no proven method to control such bubbles. All countries are trying their best on a trial-and-error basis to do so, he said. Improved regulation and supervision is needed.

“You can’t legislate or control optimism, after all,” Davies said. “The key is to find out where the holdings are. China has 90 million individual investors now, 30 million of which are new investors that just opened their accounts this year.

“For the country, the most important thing is to ensure these investors are not hurt. These new retail investors are rather ‘amateur’ compared with others. For the large investors including institutions, if they lose, it’s regretful. But that’s all, because they are at their own risks. But for the smaller ones, the most urgent task is to educate to make them beware of the risks.”

China saw the consumer price index grow 3.4 percent in May and it is expected to maintain a high level until October. Asked about his suggestions to the central bank in controlling inflation, the former deputy governor of Bank of England said the 3 percent or so inflation is rather low compared with the rapid economic growth China is going through, and with developed economies. The central bank needs to use interest and exchange rates leverage in combination to address the excessive liquidity problem, he said.

Sir Davies disagreed that speculative international “hot” money has pushed up China’s property prices, to bet on the renminbi’s appreciation. Davies said such a conclusion is groundless as there is no available statistic to prove how much international money has contributed to the price rises. In addition, the property prices in China, considering the rapid economic growth, are rather low, especially compared with international standards.

“(The) exchange rate of yuan against US dollar is rising fast, but with other currencies, it remains stable,” Davies said.

On China’s plan to invest part of its mounting foreign exchange reserves through the state investment company, Davies said the idea of “diversification” is in general “good” as it may reduce risks from holding a single currency as the country’s “treasure”. China could learn from Singapore’s experience, he said.

But it is wrong to pursue diversification at all cost, Davies believes. “The top priority is still on stability,” he said. He did not think the recent price plunges in Blackstone shares, the US private equity firm China’s state investment company has invested in, means a failed investment. From the long-run perspective, a strategic or large shareholder earns from the profitability of the company, rather than from speculation on ever-changing share prices, he said.

Finally, the director of LSE expressed his willingness to train more Chinese academics and officials at his school to better aid the development of China’s economy. With the summer schools launched in Beijing and a new Confucius institution in London, LSE will welcome and educate more Chinese and international students interested in Chinese studies, Davies said.

 

Stocks plummet after stamp tax hike

By Dong Zhixin (chinadaily.com.cn)
Updated: 2007-05-30 09:26

A woman blows a bubble gum at a stock exchange market in Shanghai May 29, 2007. China has raised stamp tax on securities trading has been raised from 0.1 percent to 0.3 percent beginning Wednesday, May 30, in an effort to cool the overheated stock market. [Reuters]

Chinese stocks plummet more than six percent on Wednesday after an announcement of a hike in stamp tax on stock trading.

The benchmark Shanghai Composite Index has lost 6.08 percent to 4,071.27 points at the end of morning trading after opening 5.78 percent lower.

Shares of brokerages were hardest hit due to concerns that the tax would lead to decreased market turnover which in turn will affect brokerage revenue. CITIC Securities and Hong Yuan Securities both opened down their 10 percent daily limits.

China Life fell 6.76 percent to 37.27 yuan, followed by Ping An Insurance of China which went down 6.14 percent to 60.99 yuan.

The Ministry of Finance announced Tuesday night the stamp tax on stock trading will rise to 0.3  percent from 0.1 percent starting from Wednesday, in the authorities’ latest move to cool down the country’s runaway equity market.

A ministry official said the move is intended to help promote the healthy development of the securities markets.

Analysts said the tax hike could dampen the market in the short term, but would not cause a crash or reverse a long-term uptrend.

Ha Jiming, chief economist of China International Capital Corporation said the hike will increase investors’ transaction cost and is expected to curb short-term speculative activities. But the influence on long-term investment is limited.

“The hike will neither reverse the upward trend of the stock market, nor lead to consistent downfalls,” he said before describing the hike as good news for the long-term healthy development of China’s capital market.

The policy will help the market become more rational, said Ha. However, to return full sobriety to the market, the government need to come out with more policies.

He Qiang of Central University of Finance and Economics deemed the new policy’s influence largely “psychological”.

“Currently, the investors’ return from the stock market is high,” said he. “The stamp tax hike will increase the transaction cost, but is unlikely to bring about substantial reduction to the high return.”

The fiscal measure came after a series of monetary tools by the central bank failed to produce marked results in cooling down the market. The Shanghai Composite Index, the most widely watched indicator of the mainland’s stock market has soared more than 60 percent so far this year on top of a 130 percent rally in 2006.

China’s central bank has raised interest rates twice and bank reserve requirement four times this year. However, the stock market ignore the signal and rose on the first trading day after each tightening.

The booming is partly driven by the flood of new investors. The number of stock accounts, including A-, B-shares and closed-end funds in the Shanghai and Shenzhen stock exchanges reached 100.27 million by Monday, according to statistics from the China Securities Depository and Clearing Corporation.

The stock market frenzy has aroused mounting bubble concerns, from both home and abroad. The latest warning came from former chairman of US Federal Reserve Alan Greenspan who warned last week China’s stock market was clearly unsustainable and faced a dramatic contraction.

Greenspan’s remarks followed warnings from Asia’s richest man, Li Ka-shing who said China’s stock valuations “must be a bubble” and prices are likely to decline. Central Bank governor Zhou Xiaochuan also expressed concerns earlier this month.

Some analysts have been advocating the adoption of fiscal measures, including the hike of the stamp tax which is collected based on transaction turnover and is levied on both sellers and buyers.

In the 16-year-plus history of China’s stock market, a stamp tax hike usually led to a slump.

China started to collect a stamp tax on the Shenzhen Stock Exchange in July, 1990, but only on sellers at 0.6 percent. Four months later, the buyers were also subject to the tax.

The tax triggered a downturn in the Shenzhen market, forcing authorities to cut it in half to 0.3 percent in October 1991. At the same time, the Shanghai Stock Exchange also began collecting duty on both sides of trades.

On May 10, 1997, the tax rate was upped to 0.5 percent, partly blamed for a bear market that lasted until mid-1999. The rate was lowered to 0.4 percent in June, 1998 before being adjusted to 0.3 percent one year later and to 0.2 percent in 2001.

Regulator further lowered the duty in January 2005 to 0.1 percent in order to boost stock prices during a market slump lasting from 2001 to 2005. 

 

Sharp rise of yuan may cost millions of jobs

mBy Xin Dingding (China Daily)
Labor experts have warned of huge job losses if the Chinese currency continues to appreciate sharply.A study by the Institute of Labor Science affiliated to the Ministry of Labor and Social Security said if the yuan rises by 5-10 percent, about 3.5 million workers in non-agriculture sectors might lose their jobs and some 10 million farmers could be affected.

The yuan has risen by more than 7.5 percent against the US dollar since China scrapped the peg to the greenback in July 2005. The central bank set the yuan’s central parity rate at 7.6538 to the dollar yesterday, compared with 7.6512 on Monday when it hit a new high.

A stronger currency makes Chinese exports more expensive in overseas markets, damping demand; but at the same time, imports would be cheaper.

The study said five non-agriculture sectors – textile, apparel, footwear, toy and motorcycle industries – would bear the heaviest brunt; as would agriculture.

“The five non-agriculture industries are all labor-intensive, relying heavily on exports. Any appreciation will curb exports and wipe out enterprises’ profits, which are already thin – between 3 and 5 percent,” said You Jun, head of the institute, who compiled the study report with Guo Yue.

“The apparel and motorcycle industries will suffer most, because both have little or no processing trade,” he said.

For enterprises involved in processing trade, the negative impact of the currency appreciation can be offset by lower prices of imported raw material and spare parts.

The footwear and toy industries, which rely on exports, will also suffer greatly.

In the best-case scenario, the appreciation might only slow the growth of employment. But in the worst, all five industries – which provided 24 million jobs in 2004 – could shrink; and 3.5 million people could be sacked, the study predicted.

Beijing, Shanghai, Tianjin and Dalian cities; and Guangdong, Jiangsu, Zhejiang, Fujian and Shandong provinces will suffer more than other regions.

The rise of the yuan’s value will also hinder the export of agricultural products, and allow more imported agricultural products at a cheaper price.

“If the yuan rises 5 to 10 percent, the price of imports of soybean, cotton, winter wheat and corn will drop by 5 to 10 percent, and as a result, the cultivated area will shrink,” the study said.

About 100 million farmers make a living on the four crops, and it is estimated at least one in 10 will be affected.

 

How long will bull market last?

Economists are divided about how long the Chinese mainland’s bull stock market can continue to charge ahead, with some arguing that yuan-denominated A-shares are overvalued, the China Securities Journal reported on Monday.

“In my opinion, the benchmark Shanghai Composite Index could realistically hit 6,000 points in 2008″, the report quoted Jin Yanshi, chief economist with Xiangcai Securities, as saying.

“The value of the A-share market would then be 24 trillion yuan (3.17 trillion U.S. dollars), equivalent to 96 percent of China’s gross domestic product”, Jin added.

Hua Sheng, president of Yanjing Overseas Chinese University, pooh-poohed Jin’s prediction, saying the overheated market would not last long and that a 6,000-point index would require “a painful adjustment”.

“Risks can be reduced if the government adopts a series of measures now to guide the stock market; otherwise the market will be unable to sustain the increasing risks,” said Hua.

But the report quoted Jin as saying the biggest risk comes from government interference in the market.

Experience in the United States, the United Kingdom and Japan showed government interference would negatively impact the capital market, said Jin.

Zuo Xiaolei, chief economist with China Galaxy Securities, also expressed concern about the rising market values of listed companies, which she believes have grown out beyond their real value.

“Excess liquidity is generally thought of as a serious macroeconomic problem, but in fact it provides an opportunity to promote the Chinese capital market”, said Wu Xiaoqiu, director of the Financial and Securities Institute, Renmin University of China.

“Bank deposits are flowing into the stock market at an unimaginable pace — we are just on the threshold of a 10-year bull market”, said optimist Han Zhiguo, director of Beijing Banghe Wealth Research Institute.

 

China’s strengthening is not bad news for America

By Daniel H. Rosen (ABC News)
Updated: 2007-05-15 10:29 “Charity rejoices in our neighbor’s good, while envy grieves over it.”That quotation from Thomas Aquinas sums up the current China debate. America has a choice to make, between taking comfort in China’s poverty reduction – the greatest in human history, largely achieved using our economic model – or wishing it back to the failed state it was before the boom began.

Do we honestly want to deal with a stagnating country of 1.3 billion people with nuclear weapons? To grieve over China’s growth is to stick our heads in quicksand. The only responsible position is to be glad that China is becoming more fit to look after its people, take responsibility for its environmental impact and meet its responsibilities as a Great Power.

China does and will present challenges to US interests, some of them even what could be considered “threats.” This does not mean China is a future enemy: Some of these are the same problems we manage with allies and friends from Canada to Japan to Europe, and China has many of the same geopolitical goals as the United States, so we may well need to be partners in global affairs.

How the United States reacts to China will have a significant influence on its future, and we are much better off with the challenges of a strengthening China than a collapsing or stagnant one.

On the economic side, China’s currency is undervalued, its banks loan too much and the government is too quick to bail out uncompetitive firms to prevent unemployment. It is like the US bailout of Chrysler in 1979-80, only 100 times over. These and other economic distortions need fixing: Some of them unfairly boost exports, and in fact almost all are being reformed in the right direction, but often at a pace that does not satisfy.

Importantly, none of these Chinese problems are existential threats to the United States or other wealthy nations. Tools are available to confront China’s exports when we conclude they are unfairly promoted: The main question has been internal – whether our consumers are willing to pay more for their shopping in order to make India or Vietnam the origin of our goods instead of China.

Because when we do put punitive barriers on China’s products, it is usually Mumbai and Saigon that pick up the contracts, not Michigan or Schenectady. Meanwhile, with just 43 percent our work force size Japan exports $10 billion a month to China while we ship only half of that; Germany has just one-quarter our employed population but has run a surplus with China over the 14-year period to today. Clearly China is not closed to rich-world wares; we spend too much time blaming China for growing, while our real competitors in Europe and Asia focus on their strengths.

Is China’s growth bad news for us on the political front? It is hard to see how.

Assuming for the moment that Communist Party authoritarianism is wrong for China despite its meteoric success maintaining growth, there is still reason to see the glass half full.

The government that launched reform in 1979 when per capita incomes were $200 bears little resemblance to the Beijing that today must manage a $2,000 per capita country. In Shanghai and Guangzhou, where incomes near $7,000 per capita, people elect their own co-op boards and select PTA representatives for their kids’ schools. Middle class people participate in society in a different way, the Communist Party recognizes this and is quietly making room to accommodate it. The government that runs the $10,000 per capita China of 2025 will be as different from today’s unaccountable system as Shanghai’s co-ops are from the collective dormitories with shared toilets that dominated the housing sector a generation ago.

Finally, what about the security realm: Is a stronger China likely to dilute US global military dominance? Well, yes and no.

China’s defense outlays are rising, and technological capabilities are rising too. But the US lead in these regards is so great that we are talking decades before parity is even a distant question. As a regional military power with no tradition of global force projection and little interest in replicating America’s entanglements in Iraq, the Middle East and elsewhere, China will not attempt to make up the gap with “asymmetric” power.

In fact, with 11 contiguous neighbors, three of them heavily Islamist, five of them patently unstable and three of them nuclear or near-nuclear powers – not even counting the Taiwan “theater” – China has plenty to worry about in the neighborhood without looking further afield. Many of us in America, such as former Deputy Secretary of State Robert Zoellick, are more interested in drawing China out to share the global burden with us than spending treasure to contain them from doing so.

A positive attitude toward one another’s successes is a necessary starting point for the United States and China – the world’s strongest incumbent and strongest aspirant – to work together on problems. Global warming, energy security, Islamic extremism and a host of real challenges await our cooperation, and cannot be dealt with one without the other. We have the competitive strength and endowments needed to win from China’s growth, just as Japan – despite simmering political – has done with two decades of steady trade surpluses.

It is past time for our ambivalence to stop: Those against China’s growth will only be satisfied by an Iraq-like outcome which, once again they are entirely unprepared to deal with were it to happen.

(Courtesy of ABC News)Daniel H. Rosen is principle of the China Strategic Advisory and a visiting fellow at the Institute for International Economics.

 

Smart Ways to Get Started

By Motley Fool Staff

January 22, 2007

 As we’ve written before, a volatile market can provide choice investment opportunities. It’s when stocks are on sale, after all, that savvy types go shopping. What’s more — counterintuitive though it may seem — turbulence is good news for new investors, too. It means they have a chance to begin building their nest eggs on the relative cheap.

With that in mind, this commentary begins a three-part series on smart moves that brand-spanking-new investors ought to consider as they test the market’s waters.

First up: building your portfolio around solid large-cap stocks.

Anchors aweigh
Just about every investor should anchor his or her portfolio to a well-diversified basket of large-cap stocks, and one terrific no-muss, no-fuss way of doing that is to invest in rock-solid mutual funds.

Specifically, you may want to consider an index pick such as Vanguard 500 (FUND: VFINX), an S&P tracker that provides ample exposure to such big boys as ExxonMobil (NYSE: XOM), General Electric (NYSE: GE), and Citigroup (NYSE: C). This fund has been tough as nails to beat over the years, and best of all, its expense ratio is a mere 0.18%.

Lump-sum investors, meanwhile, can go an even cheaper route by plunking down their moola in the popular S&P-tracking SPDRs (AMEX: SPY) exchange traded fund (ETF). Since ETFs trade like stocks, you’ll have to pay a commission each time you buy and sell them, but the expense ratio is a dirt cheap 0.10. (To learn more about ETFs, browse our ETF Center.)

Get active
That said, investing exclusively in index funds means that you’re pretty much destined to lose to the market each year by about the amount of the fund’s annual expenses. Fools can and should do better than that, which is why active management can be a good thing — in particular, in pairing passive picks like Vanguard 500 with the cream of the fund industry’s actively managed crop.

One fund worth considering is Neuberger Berman Socially Responsive (NBSRX). It targets the market’s big boys, too, but the fund’s strategy diverges from the Vanguard fund’s in several significant ways. For starters, the management team here presides over a portfolio of just 33 names, a compact collection that includes behemoths such as Novartis (NYSE: NVS) and Texas Instruments (NYSE: TXN). What’s more, the companies the fund holds have made it through an obstacle course of social criteria that includes rigorous screens against, among other things, tobacco and firearms.

The results? This fund has beaten the S&P over one-, three-, five-, and 10-year trailing periods. Not too shabby, eh?

That’s a wrap
Now that we’ve covered large-cap stocks being anchored in your portfolio, the next step — part two of our series — is to look at portfolio diversification to for market volatility. We encourage you to get the inside scoop on our Motley Fool Green Light service. In the newsletter and on our information-packed companion website, we have tips aplenty for folks who are trying to a grip on their financial future — smart ways to begin your investing career most definitely included.

This article has been updated by Foolish research associate Katrina Chan and was originally published on July 6, 2006, by Shannon Zimmerman. Katrina does not own shares in any of the companies mentioned.

Neuberger Berman Socially Responsive is a Champion Funds recommendation. The Fool has a strict disclosure policy.