Recently, Shenzhen Stock Exchange (SZSE) held a seminar on local government bond ETFs in Beijing to discuss matters on taking further advantage of ETFs to improve the liquidity of local government bonds. The corporate bonds supervision department of China Securities Regulatory Commission (CSRC), the Ministry of Finance of the People’s Republic of China and officers from SZSE were present at the event, and 70 representatives from 16 financial departments (bureaus), 35 market insinuations including banks, securities companies, and fund companies took part and made in-depth exchanges.
Representatives at the meeting pointed out that Exchange market has become an important place for the bidding and issuance of local government bonds over the past years, has greatly improved the bond issuance efficiency of local government and effectively guaranteed the fund source of major projects. All market participants should stick to the idea of innovation and development and the market-based principle, continue to cultivate and enrich investment parties, increase the liquidity of local bonds and reduce issuance costs, and promote the high quality development of local economy.
It was also pointed out that ETF market had witnessed great development in 2018 with market institutions contentiously increasing the ratio of EFT products in assets allocation. As an open-end fund that tracks local bonds indexes for investment, and that is listed and traded in Exchanges with variable fund shares, local bond ETFs connect local bonds and Exchange market investors, satisfy investors’ investment needs in particular boards, for particular indexes and regional local bond types. Continuous advancement of the innovation and development of local bond ETFs can be beneficial in optimizing the investor structure of local bonds, enhancing investment value and improving the liquidity of local bonds. Currently, 10-year term local government bond EFTs are listed and traded in the market, while 5-year term local government bond EFTs have been approved, and EFTs that tracks underlying indexes of other local bonds are to undergo approving and review procedures.
Officers from SZSE said that SZSE has deepened financial service cooperation with local governments actively over the past years, and as of now, local bonds cover 24 provinces, cities and autonomous regions. In 2019, there have been 19 successful biddings with an issue volume of RMB 340 billion in total. Subscription from underwriting syndicates is active, and market organization, material verification, bidding and issuance and other comprehensive service work has gained fully recognition from the market participants. Under the unified leadership of CSRC, SZSE will continue to address weak links, perfect fundamental systems, and enforce the construction of Exchange-traded bond secondary market. By making use of its innovation edge and platform, SZSE will enrich product system including local bond ETFs, enhance market efficiency, perfect market service and promote the high quality development of SZSE’s bond market.
