Original New Economy IP New Economy e-line 2022-07-13 09:42 Posted in Guangdong
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#ETF
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low-risk product in the market.
New Economy e-line learned that on July 11, 2022, the first batch of policy financial bond trading open-end index securities investment funds (hereinafter referred to as government gold bond ETFs) were officially approved, and fund companies such as Cathay, Fuguo , Bose, China Merchants, and GF have obtained regulatory approvals.
The so-called government bond is issued by National Development Bank , China Agricultural Development Bank , China Export-Import Bank , and China Export-Import Bank , and is guaranteed by the central government. It is called "quasi-treasury bond". For investors, policy-based financial bonds have a high credit rating, large scale and good liquidity, which are relatively stable investment targets. Ou Zhiming, deputy general manager of
China Merchants Fund , said that the government bond ETF approved this time is a cross-market bond ETF, which will help promote the interconnection between the banks and the exchange market, increase the overall scale of my country's bond ETFs, and enhance the influence of bond ETFs on the Shanghai and Shenzhen Stock Exchanges.
From the perspective of product application process, as early as April 22 this year, the government bond ETFs first applied for by six fund companies including Cathay Pacific, Fuguo, Bose, China Merchants, Jianxin , and Huaan were accepted. Immediately following, the application materials of five fund companies including Southern, Huafu, GF, Huitianfu , Huatai-Prudential were also accepted at the end of April.
In May and June, five fund companies including Ping An , Puyin Ansheng , Huaxia , ICBC Credit Suisse , Dacheng, and other 5 fund companies have also submitted application materials and been accepted. On July 4, Western Lide latest joins the battle. According to incomplete statistics from the New Economy E-line, since April this year, a total of 17 managers have been interested in snatching the "cake" of cross-market bond ETFs.
The industry believes that this approval fills the gap in the previous industry's government-free gold bond ETF products, further improves the risk gradient of on-site instrument products, and meets investors' diversified investment needs. With its convenient transaction, low cost and high transparency, this type of product has a large market development space.
Cash redemption mode operation
According to the new economy e-line, the first batch of government bond ETFs will operate in the cash redemption mode. Fuguo Fund Relevant persons believe that compared with the physical redemption model bond ETF, it not only covers more bond varieties, but also optimizes investors' redemption experience.
"In view of the fact that the physical redemption model bond ETF can only hold bond targets in Shanghai and Shenzhen, cash redemption bond ETF can not only hold exchange bonds, but also cover interbank market bonds." said the above-mentioned person from the Wells Fargo Fund. "At the same time, under the physical redemption model, the basket of bonds obtained by investors after redemption may have low liquidity and poor credit quality. Cash redemption bond ETFs can help investors get cash directly after redemption while ensuring redemption efficiency, effectively improving investors' redemption experience."
A list of partial government gold bond ETF declarations
Source: China Securities Regulatory Commission official website
Relevant person from Cathay Fund said that in terms of operation mechanism, the difference between cash application and redemption of government bond ETF and ordinary government bond is that investors of ordinary government bond index funds subscribe and redemption in cash by over-the-counter cash, and redemption generally takes T+3 or more. Cash redemption government bond ETF can not only subscribe and redeem in cash on the market, but also add the function of listing and trading. Funds can be available as soon as possible on the day of redemption or sale, providing investors with a more flexible and convenient investment method. Therefore, such products are suitable for investors with asset allocation needs or relatively low risk-return preferences.
From the perspective of market opportunities, the slowdown in economic growth or downward trend is generally accompanied by the decline in interest rate , that is, the bond price increases, reflecting a certain risk aversion function of bond ETFs. For example, government bond ETFs mainly invest in policy financial bonds, and this type of asset has the characteristics of cash flow stable and relatively low credit risk. Bond ETFs have a low correlation with yield of assets. From the perspective of major asset allocation, multiple assets with low correlation can achieve risk diversification and reduce the volatility of the asset portfolio.
Take Bose China Bond 0-3 Guotai Bond ETF, a subsidiary of Bose China Bond 0-3 Guotai Bond Index . The market capacity is large enough. The investment target is the interbank market Guotai bond. There is no need for the NTD bond to be transferred from over-the-counter to the NTD to the market. It does not change the existing pattern of the investment target's transaction and custody in the interbank market, and can promote the interconnection of the interbank and exchange markets, and play a role in reducing the NTD 20% discount for funds. The relevant person in charge of GF Fund said that the approval of GF China Bond Agricultural Bank Bond Issuance ETF further enriched the bond asset allocation toolbox with lower risks. The issuer of the China Bond- Agricultural Development Bank of China Bond Index is the Agricultural Development Bank of China, one of the state-owned policy banks, and one of the issuing entities with a high "ESG" content in my country's current bond market. The main task of issuing bonds is to raise funds for agricultural support based on national credit and rely on the market, and support the sustainable and healthy development of agriculture and rural areas.
The aforementioned person from Fu Fargo Fund emphasized that for investors, policy-based financial bonds have a high credit rating, large scale and good liquidity, which are relatively stable investment targets, while ETF varieties can be traded on-site , with good liquidity and high investment efficiency. As a major new product combining the advantages of both, government bond ETFs are conducive to promoting the interconnection of interbank and exchange markets and enriching bond investment tools. Investors can use government bond ETFs to trade or long-term allocation.
hunting cross-market bond ETF
New Economy e-line noticed that now, with the successful connection between the two bond markets of interbank and exchange, the development space of domestic bond ETFs has been opened. For fund managers, the breaking of government bond ETFs means that a cross-market bond ETF hunting is about to begin.
Previously, my country's bond market was still dominated by the interbank bond market, and the domestic bond ETF market was still in its early stages of development. The reason is that the targets linked to bond ETFs can only be limited to the exchange market, resulting in the small scale of domestic exchange bond ETFs and slow development.
ETF Market distribution
source: Wind
Wind Statistics show that as of the end of the first quarter of this year, there were only 13 bond ETFs listed in the entire market, and the total net asset value of the fund was only 23.044 billion yuan. Judging from the issuance of new products, no bond ETF has been established this year. In the previous two years, 2020 and 2018, four bond ETFs were established.
Among the bond ETF managers, the top Haifutong Fund has 5 products, including Haifutong Shanghai Stock Exchange 10-year local government bond ETF, Haifutong Shanghai Stock Exchange 5-year local government bond ETF, Haifutong Shanghai Stock Exchange Municipal Investment Bond ETF, Haifutong Shanghai Stock Exchange Investment Grade Convertible Bond ETF, and Haifutong CSI Short-term ETF, with a total management scale of 8.642 billion yuan, accounting for nearly 40%.
Cathay, Penghua, Ping An and other three fund companies each have 2 bond ETFs, namely Cathay Shanghai Stock Exchange 10-year Treasury bond ETF and Cathay Shanghai Stock Exchange 5-year Treasury bond ETF, Penghua CSI 0-4-year Local Government Bond ETF and Penghua CSI 5-year Local Government Bond ETF, Ping An 5-10-year Treasury bond active bond ETF and Ping An China Bond-medium-high-grade corporate bond spread factor ETF.
As early as May 2019, People's Bank of China and China Securities Regulatory Commission jointly issued the "Notice on Doing a Good Job in Innovation Pilot Work for Open Bond Index Securities Investment Funds". The notice clearly states that cross-market bond varieties are investment targets, which can be listed on exchanges or transferred in interbank market agreements public fund . However, due to the different rules of custody, clearing and delivery in the interbank and exchange bond markets, when the two trading markets are not connected, it is difficult to implement cross-market bond ETF innovation.
In addition, Boshi Fund believes that government bond ETFs will help attract more overseas funds to invest in policy-based financial bonds. Under the east wind of the national strategic decision of "Bond Connect", a large number of overseas investors plan to participate in domestic bond market investment, have quasi-national credit, and have good liquidity policy financial bonds such as national opening bonds have become their important choices.
statistics show that since the "Bond Connect" was launched in July 2017, the total amount of bonds held by overseas investors has grown at an average annual rate of about 40%, and the current total bond holdings are about 3.7 trillion yuan. In the first half of this year, overseas institutions achieved bond transactions of RMB 2.9 trillion and RMB 3.8 trillion respectively through the direct investment model and the "Bond Connect" model, accounting for a total of 5.5% of the bond transactions in the entire market.
Referring to the development overview of overseas bond ETFs, overseas bond ETF products are relatively mature in the US and European markets, and their products are more diversified. From the perspective of bond ETF-linked targets, overseas markets mostly show regional diversification, and broad-based bonds and credit bond ETFs account for a higher proportion. However, it shows a relatively obvious head-on feature. Whether it is fund managers, APs, market makers, , one or two leading institutions occupy the vast majority of the market share.
For fund managers, in order to seize the opportunity, in addition to developing exchange bond ETF products linked to interbank bonds, they can also actively expand credit bond ETFs in the future. At the same time, they can consider developing active enhancement products or further segmentation strategies to meet the increasingly diversified investment needs.
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