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SCMP Reporter

Beijing is going to  lift a five-year ban on  closed-end funds, allowing one to be launched  after the Lunar New Year, amid a shrinking market share for this kind of funds compared with open-ended ones, which have grown to more than 500 billion yuan in assets.

The new closed-end funds, one of which could be launched as soon as next month,  are likely to be allowed to invest in warrants, asset-backed securities, stock index futures,  foreign currencies, real estate and gold, broadening their horizon beyond stocks and bonds that such funds had previously been limited to, China Galaxy Securities chief fund analyst Hu Lifeng said.

He declined to name the fund management company that plans to launch the first fund.

'This year may become the third era  of fund development, after the fast development of closed-end funds from 1998 to 1999 and open-ended funds from 2000 to 2001,' Mr Hu said.

He expected a spate of closed-end funds to be launched after one or two pilot projects.

In a conference last month, China Securities Regulatory Commission chairman Shang Fulin said  the regulator would encourage closed-end funds to be innovative,  investing in products other than stocks and bonds.

Beijing suspended the launch of closed-end funds in 2002 after nine years of their existence in the mainland due to their relatively poor performance, few dividends and bad management.

At present,  17 fund management companies have  more than 50 closed-end funds.

However, the discount for shares in some closed-end funds has reached as much as 50 per cent to assets as their limited options have made them unattractive to  investors.

Closed-end funds offer a limited number of shares that can then be cashed in, whereas an open-ended fund can ostensibly raise money continuously from new investors.



Mainland to lift ban on closed-end funds