Markets

Shanghai Stock Exchange to expand ETF trading

By Li Xiang (China Daily)
Updated: 2010-11-27 09:48

BEIJING - The Shanghai Stock Exchange (SSE), which marked its 20th anniversary of trading on Friday, is planning to boost the market of Exchange-Traded Funds (ETF), a relatively new breed in China's securities market, to cater for the growing appetite of Chinese investors.

Zhou Qinye, vice-president of the SSE, recently said that the bourse is planning to introduce more cross-market and cross-border ETF products. It recently signed agreements on index authorization with nine international index companies and five exchanges.

Industry players and analysts are positive about the outlook for ETFs in China, saying that their introduction will offer investors more asset allocation products, given the current shortage of investment tools in China.

"The potential of the Chinese ETF market is huge," said Zhang Qi, an analyst at Haitong Securities. "The trend is that ETF-related products will also expand to the commodities market, providing fund companies with more products to sell and giving investors wider investment choices."

The indexation investment market on the Shanghai bourse has seen remarkable growth over the past few years. Twelve ETFs are currently traded in Shanghai, boasting an asset size of up to 50 billion yuan ($7.5 billion).

The bourse is also vigorously promoting the innovation of indexation investment, and will launch a new index, the SSE 380 Index, on Nov 29.

It will target emerging and growing blue chips to mirror the overall performance of an array of medium-sized listed companies. The index, in conjunction with the SSE 180 and SSE 50, will constitute the major blue-chip indices of the Shanghai market.

The rapidly growing ETF industry in China has also helped fund managers rise as significant players.

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China Asset Management Co, the largest domestic asset manager, and E Fund Management Co, the country's fourth-largest fund house, both saw their ETF assets reach more than $3.9 billion by the end of August, according to a report from the New York-based asset management company, BlackRock Inc.

The first domestic ETF was introduced in 2004 with the listing of the SSE 50 ETF by China Asset Management. Analysts said that ETFs have become an increasingly important way for many international institutional investors, and retail investors, to access the A-share market.

In the meantime, the Shanghai Stock Exchange is also actively promoting cross-border ETFs, which will allow Chinese investors to tap overseas capital markets.

The first cross-border exchange focusing on listed companies in Hong Kong will be traded in Shanghai next year.

The Chinese fund house Bosera Asset Management Co Ltd earlier this year also announced that it had obtained rights from Standard & Poor's to launch an S&P 500 ETF specifically designed for Chinese investors.