Shanghai bourse mulls offering bond ETFs

The Shanghai Stock Exchange (SSE) is considering launching a series of exchange traded funds (ETFs) which invest in the country's bond market, the National Business Daily reported Tuesday, citing an insider from the exchange, a move which experts say will help ease the growing demand for fixed-income products among Chinese investors.

So far the exchange has not pushed forward any concrete measures regarding the new ETFs or set a time frame for their launch, a spokesperson from the exchange told the Global Times Tuesday.

While details are still forthcoming, last month the exchange gave its approval to Bosera Fund and Guotai AMC, two local investment fund management firms, to design ETFs that will invest in sovereign and corporate debt respectively, said Zhang Yongmin, an executive manager from Qilu Securities.

The launch of bond ETFs in China will be a huge boom to the growing number of retail investors who are eager to shed their equity investments and take positions in fixed-income products while the mainland stock market idles at three-year lows, Xu Weilin, an analyst from Z-Ben Advisors, a fund investment consultancy, told the Global Times.

However, with China's debt market just over two decades old, there are still a limited number of bond products available in the market, said Zhang.

Despite the government's recent moves to expand the capital market and allow more debt securities to be sold in the country, relatively few Chinese enterprises have issued bonds and most local firms are still looking to the stock market and bank loans as their major sources of financing, said Zhang.

The launch of bond-linked ETFs will not only be another step toward the development of the country's bond market, but also give investors with a low tolerance for risk an alternative to the unruly mainland stock market, said Zhang.

According to Xu, the domestic market has witnessed a proliferation of funds tied to fixed-income products as investors exit the volatile equities market, and for the most part these funds have had little trouble attracting investors.

Investors placed 364.94 billion yuan ($57.5 billion) worth of capital into funds launched during the first eight months, a five-year high, and most of this amount was directed toward fixed-income related funds, according to the figures from Wind, a financial data provider.