Small and medium investors are expected to get more choice and
market confidence will receive a boost under a draft law on
securities investment funds.
The draft legislation was submitted yesterday to the latest session
of the Standing Committee of the 10th National People's Congress
(NPC) for a second review.
The national legislators, who began their bi-monthly session
yesterday, will also review draft legislation on residents'
identity cards, ports, control and prevention of radioactive
pollution, road traffic safety and administrative approvals during
their week-long meeting.
Securities investment funds are mainly mutual funds invested
primarily in stocks and operated by investment companies.
They are attractive because most of the stockholders in the Chinese
mainland's stock market invest individually and are generally weak
in shielding off risk, and therefore more vulnerable to market
fluctuations.
Retail investors pay a fee to invest their pooled money in order to
see more stable returns on investments through the use of
professional fund managers.
"Development of the securities investment funds will help enhance
investor confidence and ignite the securities market," said He
Yongjian, vice-director of the economics legislation office with
the Law Committee of the NPC Standing Committee.
Currently China has approved 28 investment companies who are
running 54 close-ended funds and 21 open-ended funds.
Close-ended funds are those with a fixed number of total available
shares. They cannot be resold to a company for a fixed period of
time and shares can only be traded among other investors.
Availability of open-ended funds, however, is based on demand.
Investors can only buy and redeem their shares at banks and cannot
sell them in the market during the life of the fund.
The net assets of the country's securities investment funds have
reached over 120 billion yuan (US$14.5 billion), accounting for
less than 10 per cent of the nation's stock value, according to the
latest statistics from He's office.
But they are now governed by only a temporary regulation on the
management of stock funds, issued by the State Council in 1997.
A
more sophisticated law would oversee all registration and
activities of investment companies that run securities investment
funds and help bring a more orderly presence to current immature
market sentiment, according to sources with the legislature.
The draft legislation is expected to include stipulations that
standardize the operation of investment companies and check for
irregularities, such as opaque operations and late disclosure of
information.
A
draft bill is put forward for a vote usually after three rounds of
deliberations.
(China Daily June 24, 2003)