Published On: Thu, Oct 8th, 2009

ETF Market In China Is Booming

“The development of ETF has been beyond our imagination and it is now making good time.” Vice President Liu Xiaodong of the Shanghai Stock Exchange (SSE) said at the ICBC Credit Suisse SSE Central State-owned Enterprises ETF release conference July 17, 2009 that the SSE would drive the development of ETF further to enrich the variety of the ETF products and gradually build it into one of the major SSE products.

According to Liu, ETF is a kind of open-ended index fund listed and traded in the exchange, which tracks a basket of stocks with the characteristics of low cost, diversified investment, high transparency and high fluidity. Since the birth of the first ETF in 1993, ETF products have flourished rapidly worldwide. As of the end of April 2009, over 3,000 ETF products had been listed on 42 exchanges worldwide, with the asset scale up to US$706.9 billion in total. An increasing number of companies have engaged in the development of ETF products, with the amount of existing ETF administrators more than 90 and a number of fund management companies specializing in ETF products. Meanwhile, the variety of ETF products have been diversified from the single stock ETF to bond ETF and commodity ETF, from the ETF in single market to the ETF across markets and from the passively managed ETF to the actively managed ETF. It is noticeable that ETF products have become one of the most successful products worldwide at the moment as they realized large sums of net capital inflow even under the international financial crisis in 2008 when the global asset depreciated seriously.

Liu pointed out that the ETF market in China is still growing, and the SSE has always attached importance to the promotion of product innovation. The introduction of ETF products was the important measure taken by the SSE in recent years to develop the fund industry, perfect the product variety and drive the innovation. On the one hand, ETF products enrich the investment variety and provide investors with a cost-efficient asset allocation tool which tracks index income. On the other hand, ETF product, like the index, is unlikely to be manipulated. With high fluidity, it is one of the major targets of derivatives as well as the cornerstone of product innovation. Through the efforts of all market participants, the SSE introduced the first ETF product to the domestic market in early 2005 and won several international awards. After 4-year development, there are 5 ETF products in the domestic market, with the asset scale of over RMB30 billion and the daily trading volume of approximately RMB2 billion. In terms of the asset scale, the domestic ETF market is the 3rd largest ETF market in Asia following Japan and Hong Kong. With regard to the trading scale, the domestic ETF market is ranked first in Asia and placed among the top 10 globally. As a whole, the development of ETF in the past was successful. The SSE Central State-owned Enterprises ETF introduced by ICBC Credit Suisse Asset Management Co., Ltd. this time is the first ETF product introduced by the domestic market in the last two years. SSE Central State-owned Enterprises Index comprises 50 listed companies with large scale and high liquidity controlled by central state-owned enterprises. These companies are also leading enterprises in 10 to-be-revitalized industries that the RMB4000 billion national investment is planned for. The timely introduction of SSE Central State-owned Enterprises ETF provides investors with an opportunity to share the income of the high quality large-cap stocks in a more easy and transparent way.

Liu also stated that with the diversification of the index, the establishment of the supporting mechanisms including the margin trading and securities lending and the stock index futures fuelled the development of ETF. In the days to come, the SSE will vigorously support the development of ETF and facilitate its expansion in terms of industry and type so as to meet the need of investors. There will be a lot of ETF products awaiting the approval for listing in the future. The SSE will actively impel the development of ETF in China and build it into a major SSE product. Liu added that there are still large space for the promotion and marketing of ETF. He appealed to the dealers to support the sale of relevant ETF index funds and work together to drive the development of ETF in China.

Article Source: Shanghai Securities News

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