The expected launch of exchange traded funds (ETFs) tied to commodities in China later this year will be a major milestone for the country's capital market and one that will likely prove popular with investors, according to analysts.
At present, there are 12 ETFs trading on the Shanghai Stock Exchange (SSE) with 40.8 billion yuan ($6.54 billion) in combined net assets, data from the exchange show.
According to analysts, China's ETF market is set to become more diversified this year as new products, including bond-backed and gold-backed ETFs, are expected to make their debuts over the coming months. All of the ETFs currently trading on the Chinese mainland are tied to publicly-traded equities and stock indices.
Shanghai-based fund manager Guotai AMC announced on February 8 that it would launch the SSE 5-year State bond ETF this coming Thursday, a move which will mark China's first State bond ETF. The country is also expected to see its first gold ETF later this year, according to statements made by the World Gold Council earlier this month.
Experts anticipate these new products will be embraced by investors once they hit mainland bourses.
"Chinese retail investors will prefer commodity-based products because they are less affected by inflation and less risky than A-shares," Qu Wenqian, a senior analyst at investment consultancy Z-Ben Advisors, told the Global Times.
Marcus Grubb, managing director for investment at WGC, said investors in China could potentially see more than one gold ETF in 2013, according to media reports.
The China Securities Regulatory Commission (CSRC), the country's securities regulator, rolled out regulations outlining the investment scope and risk controls of gold ETFs in January. "Gold ETFs can promote the development of the gold market, and enable investors to buy and sell gold in the securities market," the commission said in a statement on its website in January.
Gold ETFs have already been available in many of the world's major financial markets for several years. At the end of July 2012, there were 240 ETFs tied to the international gold market with over $140 billion in combined net assets, according to data from the CSRC.
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