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The Shenzhen Stock Exchange has been approved by the China Securities Regulatory Commission to launch Listed Open-ended Funds (LOFs), the exchange announced yesterday.
A LOF is an open-ended fund that is listed and transacted on a stock exchange. According to the LOF business regulation of the Shenzhen exchange, which was also approved yesterday, the initiator of a LOF, or the fund manager, must obtain a listing approval from the stock exchange.
Then the fund can be issued through the trading system of the bourse and become listed. During the issue period, investors can subscribe to a LOF through a valid brokerage account in the same way as buying a closed-end fund. And they can trade the fund after it is listed.
A spokesman of Shenzhen Stock Exchange said yesterday that LOF is a major innovation for the fund industry and the exchange as well. It can apply the trading and clearing systems of the exchange to provide investors a new investing tool, with convenient subscription and trading access.
Meanwhile, LOF also offers fund management companies a new and economical platform to develop new fund products and gives brokerages fresh income resources.
It will also enhance information disclosure of open-ended funds.
Several fund management companies have already applied for licenses to launch LOFs on the Shenzhen Stock Exchange.
Shenzhen-based Southern Fund Management is a pioneer in the sector. It has been working with the exchange to develop relevant rules and product designs and is a most promising candidate to bring in the first LOF for the Shenzhen Stock Exchange.
(China Daily August 18, 2004)
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