China issues ETF on Shenzhen Stock Exchange
(Xinhua)
Updated: 2006-02-22 09:56

China on Tuesday began the issue of the first exchange traded fund (ETF) on the Shenzhen Stock Exchange, one of the only two bourses on the Chinese mainland.

The Shanghai Stock Exchange issued China's first ETF a year ago.

Zhang Yujun, general manager of the Shenzhen Stock Exchange, said that ETF has a good market prospect for investors of all kinds who will enjoy low risk and high benefit from their investment.

According to Zhang, the 100ETF, under the custody of the Yifangda Fund Management Co. Ltd, will closely follow the Index 100 of the Shenzhen Stock Exchange, including the performance of China's blue-chip stocks, and stocks of some medium-sized and smaller businesses with good market performance.

The 100ETF will be traded on the Shenzhen Stock Exchange after the issue is finished on March 17. Investors can swap their constituent stock shares of the Index 100 with the Shenzhen Stock Exchange for 100ETF between March 13-17.

An exchange-traded fund, or ETF, is a type of investment company whose investment objective is to achieve the same return as a particular market index. An ETF is similar to an index fund in that it will primarily invest in the securities of companies that are included in a selected market index. An ETF will invest in either all of the securities or a representative sample of the securities included in the index.

ETFs are legally classified as open-ended companies or Unit Investment Trusts (UITs), but they differ from traditional open-ended companies and UITs.

Since the insurance of the world's first ETF in the United States in 1993, it has fast developed into a financial investment product. With a total investment fund of 336 billion U.S. dollars,the total number of ETF products in the world has reached more than 390, in which two are issued by Chinese bourses in Shanghai and Shenzhen.

In order to meet the demand of booming development in the ETF market, the two bourses are making plans to issue a number of new ETF products for investors.