Creating ETF Ecosystem to Boost New Asset Management Growth
On October 26-27, the Global Wealth Management Forum · 2024 Shanghai Suhe Bay Conference was successfully held. Wang Hong, Deputy General Manager of the Shanghai Stock Exchange, delivered a keynote speech at the plenary session.
She stated that in recent years, the domestic ETF industry has shown an accelerated development trend, which is specifically manifested in four aspects: First, the trading activity of ETFs has reached a new level; Second, the number of ETF market investors continues to grow; Third, the liquidity of leading ETF products continues to improve; Fourth, ETF dividends enhance investors' sense of gain. The Shanghai Stock Exchange continues to strengthen long-term investment forces and supports the development of index-based investment in multiple dimensions. The future development of ETFs is promising and is expected to provide new momentum for the development of the wealth management industry. In the future, the Shanghai Stock Exchange will take multiple measures to cultivate a good ecosystem for ETFs and build the Shanghai Stock Exchange ETF market into a wealth management hub product with a larger scale and higher quality.
To "cultivate and strengthen patient capital," the new "National Nine Articles" emphasizes "promoting the development of index-based investment." The themes of this forum focus on financial industry cooperation and development, asset management trends, and opportunities in long-term capital management, all of which are hot issues of common concern to all market parties.
From a global perspective, ETF products are increasingly becoming an important part of the global asset management industry. The total scale of global ETFs has exceeded 13 trillion US dollars, with an average annual compound growth rate of over 20%. Twenty years ago, the SSE 50 ETF, as the first ETF product, was officially listed. With the vigorous development of the domestic index-based investment market, ETFs have become an important asset management tool. Below, I will discuss three points of understanding on how the Shanghai Stock Exchange can help the new development of the asset management industry and promote the construction of the ETF ecosystem.
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First, the development of index-based investment has reached a new level, and market vitality is continuously stimulated. In recent years, the domestic ETF industry has developed rapidly, showing a trend of "hundreds of boats competing" and "thousands of sails setting off." Currently, there are more than 990 ETF products in the Shanghai and Shenzhen markets, with more than a hundred new ETF products launched each year. Among them, there are more than 580 ETF products in the Shanghai market. Currently, there are 8 broad-based ETF products in the domestic market that have joined the "hundred billion army," and the Huatai-Pine沪深300ETF has even exceeded a scale of 400 billion yuan, while last year at the same time, there was only 1 product in the entire market with a scale exceeding 100 billion yuan. The main changes are specifically manifested in four aspects.
First, the trading activity of ETFs has reached a new level. The total scale of the domestic ETF market has broken through the 3 trillion yuan mark, and it took 9 months to go from 2 trillion to 3 trillion. Among them, the total scale of Shanghai ETFs reached 2.6 trillion, with an average daily transaction volume of 102.9 billion yuan in the first three quarters, ranking among the top in the Asian market.
Second, the number of ETF market investors continues to grow. With the continuous deepening of the concept of index-based investment, ETFs have gradually become an important choice for investors to layout core assets, and the entry of medium and long-term funds with a focus on allocation needs has been continuously increasing. Up to now, there are more than 8 million ETF holders in the Shanghai market, which has doubled compared to the end of 2020. Among them, institutional investors hold 1.9 trillion yuan, accounting for more than 70%.
Third, the liquidity of leading ETF products continues to improve. In the first three quarters, there were a total of 23 products with a daily transaction volume of more than 1 billion yuan in the entire market, and 10 broad-based ETFs had the highest liquidity among all types. Leading products such as the SSE 300 ETF and the SSE 50 ETF have further increased their transaction volumes.
Fourth, ETF dividends enhance investors' sense of gain. The Shanghai Stock Exchange continues to guide ETFs to establish a stable dividend mechanism. In the first three quarters, 39 ETFs in the Shanghai market distributed a total of 11 billion yuan in dividends. Recently, the first quarterly mandatory dividend product - Morgan China A50 ETF was introduced, further helping investors better practice the concept of long-term investment.Second, the Shanghai Stock Exchange (SSE) continues to strengthen long-term investment forces and supports the development of index-based investment in multiple dimensions.
Firstly, the SSE adheres to a systematic approach to promote the construction of an index-based ecosystem. Recently, the SSE has formulated a new round of "Index Business Three-Year Action Plan (2024-2026)", continuously enriching index compilation, improving the index-based investment ecosystem, and gradually building an index risk management system. This year, the SSE has made positive progress in promoting the real-time release of the Shanghai Composite Total Return Index, which more comprehensively reflects the overall investment returns of the Shanghai market.
Secondly, the SSE promotes the advancement of broad-based ETFs towards excellence and strength. In the first three quarters of this year, the net inflow of funds into Shanghai's broad-based ETFs exceeded 700 billion yuan, with a total of 140 products and a scale of 1.6 trillion yuan, accounting for 77% of the Shanghai stock ETF scale. This year, the SSE has successively launched popular broad-based ETF products such as the CSI A50 and CSI A500, achieving full coverage of important broad-based indices.
Thirdly, the SSE is building a multi-level and widely covered index and product system. Shanghai's broad-based, industry, dividend, and cross-border index products are advancing in tandem. The SSE continues to deepen its service to national strategies, focuses on enriching the variety of Science and Technology Innovation Board (STAR) indices, providing investors with more diverse observation dimensions and investment targets, and deepening the positive interaction with the real economy.
Third, the development of ETFs is promising and is expected to provide new impetus for promoting the development of the wealth management industry.
Firstly, the SSE will further improve the index system and promote the vigorous development of index-based investment. It will continue to enrich the layout of broad-based ETF products, providing high-quality investment targets for long-term capital entering the market. It will further enrich strategy index ETFs, promoting the multi-level development of index-enhanced, high-dividend, low-volatility, and other strategy ETFs. In line with national major strategic layouts and the reform goals of the capital market, focusing on the "five major financial articles", the SSE will promote the continuous development of related thematic ETF products. It will actively and prudently advance the landing of REITs index-based products. Currently, there are 46 REITs listed in the entire market, with stable market operation, effectively expanded depth and breadth, and the stable return characteristics of REITs are more evident. The introduction of REITs-ETF products will more effectively diversify risks, enhance investment attractiveness, and provide new impetus for activating the REITs market, revitalizing existing assets, and serving the overall economic situation.
Secondly, the SSE will deeply implement the "Science and Technology Innovation Board Eight Articles" to serve the development of new quality productive forces. It will further enrich the variety of STAR board indices and ETFs, actively promote the inclusion of STAR board ETFs in the fund transfer platform; include STAR board ETFs in the after-hours fixed-price trading mechanism to improve trading convenience, guide funds to continuously invest in "hard technology" industries and strategic emerging industries, and serve the development of new quality productive forces.
Thirdly, the SSE will expand ETF interconnectivity to assist in the high-level opening of the capital market. It will further expand and optimize the cross-border interconnectivity mechanism of the capital market, promote the steady expansion of ETFs included in interconnectivity targets, deepen cooperation with "Belt and Road" country fund markets on the basis of existing ETF interconnectivity, enrich cross-border cooperation models of the fund market, and enhance the international influence and competitiveness of domestic indices and products.
Fourthly, the SSE will continuously improve the supporting mechanisms for ETFs and work with all market participants to jointly build a good investment ecosystem. It will continue to research and promote the normalization of ETF collective subscription services, optimize the market maker mechanism and risk hedging tools, build a "long money for long-term investment" market system, and attract more long-term capital to enter the market through ETFs.
Over the past two decades, China's ETF market has grown from nothing to large, becoming an important tool for building a multi-level capital market system. Looking forward, the SSE will work together with all market participants to further cultivate a good ETF ecosystem, build the ETF market into a wealth management hub product with a larger scale and higher quality, optimize the structure of the capital market, consolidate the foundation for the stable operation and healthy development of the capital market, serve national major strategies, and serve the construction of Shanghai as an international financial center. Finally, taking this opportunity, I would like to thank all leaders and guests for their long-term support and help to the SSE.
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