The average return of funds managed by overseas institutions to trade in yuan-denominated shares jumped 77.86 percent last year bolstered by the Chinese mainland's surging stock market, an industry report said.

Their return beat the 72.29 percent average return of domestic equity funds, according to research firm Lipper & Co.

In December, the average return of funds under the Qualified Foreign Institutional Investor scheme grew 1.79 percent, almost equivalent to the level achieved by the domestic equity funds.

The Shanghai Composite Index rose 2.56 percent in December and surged 79.98 percent in 2009.

''With a rapid increase in credit lending and asset bubble concerns, China's government has taken some action to prevent overheating,'' said Xav Feng, research head of Lipper China. ''The People's Bank of China has raised its yuan reserve requirement ratio and increased the interest rate on its treasury bills.''

But the ''performance of the A-share market (so far) this month is unsatisfactory, reflecting investor concerns over the government's new policies,'' he said.

''Only by securing stable economic growth and eliminating concerns over inflation and asset bubbles can the stock market rise again,'' Feng said.

The return of funds operating under the Qualified Domestic Institutional Investor program, which allows domestic firms to invest in overseas shares, gained 1.11 percent on average in December and surged 57.42 percent last year.

Eight fund firms got US$6.7 billion in QDII quotas after the government ended a 17 month halt to resume approval of QDII funds in late October, the report said.