YICAI｜Index Investing to Boom in China Amid New Market Landscape, Shanghai Bourse Says
(Yicai) June 20 -- The combination of policy guidance and market enthusiasm presents a strategic opportunity for index investing in China, with the government aiming to enhance the depth and resilience of the capital market, according to the Shanghai Stock Exchange.
Index investing, mainly via exchange-traded funds, is gaining momentum after the State Council published the Nine-Point Guideline action plan in April, highlighting the importance of developing long-term investment strategies and promoting the growth of index investing as a key component of this approach, the SSE told Yicai today.
Market dynamics are also contributing to this growth, the bourse noted. The acceleration of macroeconomic structural adjustments, industrial transformation, and increasing demand for wealth management products create a fertile ground for index investing in the Chinese mainland.
Index investing has taken off in international markets. "In recent years, the concept that 'active investment is difficult to outperform passive investment in the long term' has been increasingly accepted and recognized by more investors," the SSE said. "In China, the popularity of indexing investment continues to rise, ushering in a strategic opportunity period."
The SSE has been collaborating with financial research firm China Securities Index to actively enrich the index system and encourage the development of index-linked fund products.
China's index funds grew 20 percent to CNY3.4 trillion (USD468.3 billion) at the end of last month from the close of last year, a 17-fold surge from 2005. ETFs accounted for CNY2.45 trillion of that.
The 570 ETFs listed on the SSE had gained 19 percent to CNY1.84 trillion as of the end of last month from the start of this year, accounting for 75 percent of all ETFs in the domestic market. Some 33 of them reached CNY10 billion each.
The first batch of Enhanced Strategy ETFs based on the SSE STAR 100 Index launched recently, "providing more investors with excellent tools to share in the growth dividends of Shanghai's Nasdaq-like Star Market," the SEE noted.
The CSI A50 Index released this year facilitates easy investment in top firms across various sectors and has reached a record high of CNY21.7 billion (USD3 billion).
China's market for equity ETFs has vast growth potential, as assets under management are just a fraction of the mainland's market value, according to experts. Domestic stock ETFs account for only 2 percent of the total, while index funds make up about 11 percent of public fund assets, both quite low compared with developed global markets where they enjoy greater prominence.