China approves record number of bond funds
27 August 2012
News, Asia, China
China has approved a record 49 new bond funds so far this year, while regulators plan to ease rules on industry start-ups, helping to support further demand as corporate debt sales surged 52% this year, according to a report from Bloomberg on Friday (August 24).
The total number of such funds has jumped to 191 from 142 at the end of 2011 and 52 in the fourth quarter of 2008, according to data from the China Securities Regulatory Commission. Issuance from companies rose to 2.26 trillion yuan (US$356 billion) this year, data compiled by Bloomberg shows. The average return in the past year for fixed-income funds based in China was 6.1%, compared with a 20% decline for the Shanghai composite index including dividends, according to the report. “The fund management companies aren’t able to sell their equity products successfully so they have turned to bond funds,” Ivan Shi, a senior associate at Shanghai-based research firm Z-Ben Advisors was quoted as saying. “Over the past three or four years the equity market has been very bad.”
Meanwhile, the regulator said on August 22 that it will propose a switch to a registration system for new fund management businesses.
The gains in China’s corporate bond markets are a response to Premier Wen’s moves to revive an economy growing at its slowest pace in three years. In June, the central bank announced its first interest-rate cut since 2008 and widened permissible lending-rate discounts to 20%. The PBOC lowered the rate again on July 6 and widened the lending discount to 30%.
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