ETFs
ETFs have a bright future, experts say
Index investing has great room for development thanks to recently introduced government policies and the proliferation of long-term investments, said experts at the Shanghai Stock Exchange, or SSE.
The stock market trading fund, or ETF, industry, which constitutes a significant part of index investing, has seen rapid development in China since the launch of the first ETF product 20 years ago, experts noted.
At the end of May, the value of China’s ETF market approached 2.45 trillion yuan ($340 billion), of which 75% were ETF products listed on the Shanghai Stock Exchange. A total of 33 ETF products traded on the SSE saw their respective value reach 10 billion yuan. Eleven other ETFs listed on the SSE saw their value exceed 30 billion yuan each.
So far, there are more than 7,000 indices based on SSE and China Securities Index introduced to the market. I don’t understand what this means covering assets such as stocks, bonds, commodities and futures. In total, 70 percent of the indices are based on stocks.
This rich index portfolio has helped SSE offer various ETF products. As of the end of May, more than 570 ETFs were traded on the Shanghai Stock Exchange, with a total value of 1.84 trillion yuan, up 19% from the beginning of the year and accounting for 75% of the total domestic market size. ETFs.
Under closer scrutiny, the value of stock ETFs listed on the SSE reached 1.34 trillion yuan, up 24% from the beginning of the year. The value of bond ETFs has soared 62% since the start of the year, to 87.7 billion yuan.
Over the past three years, ETFs listed on the SSE have paid a total of more than 20.4 billion yuan in dividends. Since the beginning of this year, ETFs listed on the SSE have accelerated dividend payments, producing nearly 4.75 billion yuan in dividends in recent months.
In addition, some ETFs have adapted to distribute income on a monthly basis, thereby improving the predictability of dividend payments and increasing the attractiveness of the products, the SSE commented.
Continuous efforts have been made to introduce more products to meet the diversified demand of investors.
The first batch of enhanced strategy ETFs based on the STAR 100 index launched on June 18, allowing investors to better tap into the STAR market – a cradle for “hard tech” companies specializing in chip manufacturing and biomedicine.
The CSI A50 Index was introduced earlier this year, giving investors access to leading companies across various sectors. So far, the value of this product is 21.7 billion yuan.
At the end of May, the combined product value of SSE and CSI index funds reached a record high, approaching 2.4 trillion yuan. Among these, the STAR 50 and STAR 100 indices, both designed based on the STAR market, saw their combined market value exceed 150 billion yuan.
But careful securities observers have pointed out that there is still room for development for index investments in China. The onshore stock ETF accounts for only 2 percent of the market value of A-shares, and index funds occupy only 11 percent of the total size of public funds. These two figures suggest room for growth, if we compare them to those of mature markets.
With the continued inflow of medium and long-term capital, such as social security and insurance capital, the increasing efficiency of the internal market and the increasing recognition and acceptance of the concept of indexed investment, investment indexed in China has broad prospects, according to ESS experts.
The set of nine guidelines released by the State Council in April highlights the importance of building a political system for “long-term investment with long-term capital.” The development of public equity funds and index-linked investments should be encouraged, the guidelines say.
