BEIJING, Feb. 23 — The mainland’s first exchange-traded fund, or ETF starts trading Wednesday on the Shanghai bourse. The move is aimed at helping to develop the nation’s fledgling stock markets.
More than six billion units of Shanghai 50 ETF’s are being listed on the Shanghai Stock Exchange on Wednesday.
The index ETF funds are under the custody of the Huaxia Fund Management Co. Ltd, based on the index of the Shanghai Stock Exchange.
The funds have properties of both open-end and closed-end funds. Like closed-end funds, they can be traded on the exchange. The selling and purchasing method of ETFs is similar to that of closed-end funds.
The Shanghai Stock Exchange has acknowledged that the 50 ETF’s have exceeded itself by matching market demand, having low risks and catering to the current legal environment.
Zhang Houqi, assistant manager of the Huaxia Fund Management Co. Ltd is optimistic of the profit of the index fund .
“The profit of the index fund has a large room to develop, just as blue-chip stocks are on domestic bourses. If you are confident towards the growth of China’s economy and China’s blue-chip stocks, you will be confident towards the profit of the Shanghai Stock Exchange 50 ETFs,” said Zhang.
But many analysts doubted the profit prospect of the mainland’s first exchange-traded fund, saying it is merely a new financial product, and its performance is ultimately dependent on the overall performance of stocks market.
Despite this, the introduction of ETFs marks a small step forward in the country’s efforts to develop its capital markets. Investment instruments like funds are expected to bring more stability to China’s bourses, which remain dominated by short-term speculative trading.
An ETF is similar to an index-tracking mutual fund, but it can be traded on the stock exchange like a listed company all day, while mutual funds are typically priced just once a day.
According to regulations on index EFT of the Shanghai Stock Exchange, Huaxia Fund Management Co. Ltd set February four as the fund share calculation day. The net value of the Shanghai Stock Exchange 50ETF is about 0.1 US dollars per share after calculation.
The ETF was issued by Beijing-based China Asset Management Co. late last year and its initial size was over five billion yuan, or about 660 million US dollars.
Source: China View
Photo credit: World Bank Photo Collection via Visualhunt.com / CC BY-NC-ND
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