China approves 14 bln yuan stock funds -- sources

SHANGHAI, Feb 1 (Reuters) - China on Friday approved the launch of two stock funds by domestic mutual fund firms to raise up to a combined 14 billion yuan ($1.95 billion) in an apparent bid to prevent the local stock market from sliding further, sources close to the situation said.

The approval ended a months-long hiatus in the launch of new stock-oriented mutual funds, which along with fears of a U.S. economic recession and increasing stock supply, have resulted in a 29 percent slump in the benchmark Shanghai composite index .SSEC since mid-October.

After the domestic A share market closed on Friday, the China Securities Regulatory Commission gave China Southern Fund Management Co and CCB Principal Asset Management Co the go-ahead to launch the closed-end funds, the sources told Reuters.

The sources asked not to be identified because they are not authorised to announce the issues.

A source at China Southern said the company received the permission late on Friday but he declined to disclose the size of the planned fund.

Sources familiar with the situation said China Southern was given approval to raise up to 8 billion yuan, while CCB Principal, an arm of China Construction Bank (0939.HK: Quote, Profile, Research) (601939.SS: Quote, Profile, Research), was allowed to raise up to six billion yuan.

Spokespersons at China Southern and CCB Principal were not available to comment.

(Reporting by George Chena and Charlie Zhu; Editing by David Cowell)