(Yicai) Oct. 20 -- China’s securities regulator has approved the country’s first 18 actively managed exchange-traded funds, which could bring more capital into the stock market, and pledged to further open up the nation’s capital markets to foreign investors.

Wu Qing, chairman of the China Securities Regulatory Commission, announced the approvals at the Financial Street Forum annual conference in Beijing yesterday following a three-month review. The ETFs are managed by 18 domestically registered fund managers, with nine allocated to the Shanghai Stock Exchange and nine to the Shenzhen Stock Exchange.

At the Lujiazui Forum in June, Wu said the CSRC would support the bourses in introducing the ETFs.

Unlike a conventional passive ETF, which seeks to track a specific index, an active ETF’s manager picks investments independently and adjusts the portfolio according to an active investment strategy. Active ETFs have expanded considerably overseas, particularly in the United States. China’s first batch form part of a broader effort to develop the country’s publicly offered fund industry, boost the appeal of equity investment, and deepen capital market reforms.

The underlying logic governing the capital market has undergone a profound, albeit subtle, transformation, further highlighting the value of allocating assets in China, Wu said.

Listed Chinese companies reported net profits of CNY3.6 trillion (USD538 billion) and revenues of CNY37.7 trillion (USD5.63 trillion) in the first half, Wu said, with profit rising almost 20 percent from a year ago to the highest in nearly three years. Dividends and share buybacks have totaled CNY2.1 trillion, equal to 2.7 times the amount raised through initial public offerings and follow-on offerings over the same period.

To safeguard market stability, the CSRC will strengthen risk prevention for new types of business and remain vigilant against new sources of risks such as overseas leveraged products linked to individual Chinese mainland shares, Wu said. It will also improve long-cycle performance assessment mechanisms suited to long-term investment, broaden the sources, channels, and entry points for longer-term capital, deepen reform of publicly offered funds, and encourage eligible listed businesses to step up share buybacks and purchases, he added.

Deeper Reform, Opening-Up

The CSRC will also continue to deepen capital market reform and further open up the market, Wu said, adding that the Chinese economy remains underpinned by strong conditions and a positive long-term trend as it moves toward new and higher-quality growth.

As part of its broader reform agenda, the CSRC will implement detailed measures for the Star Market and ChiNext, introduce more inclusive and adaptable rules for listings, offerings, and mergers and acquisitions, issue revised rules on the registration of securities offerings by listed companies at an appropriate time, and speed up the introduction of regulations on the oversight of listed firms.

To strengthen market oversight, the CSRC will improve the rules governing penalties for improper shareholding reductions and clarify how it identifies such breaches. The watchdog will also issue guidelines on advance compensation in the securities market and set up a fund industry monitoring center.

To further open China’s capital markets, the CSRC will make it easier for Qualified Foreign Institutional Investors to invest and operate in China, support more foreign institutions in investing and doing business in the country, and speed up the inclusion of Chinese yuan-denominated stock trading counters and real estate investment trusts in the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programs.

Wu also outlined plans for the Beijing Stock Exchange. The CSRC will steadily launch ETFs tracking the BSE 50 Index, market-value-based allocation of new share offerings, and innovation evaluation criteria, and will also optimize the tiered management of the National Equities Exchange and Quotations system, also known as the New Third Board, he said.

The number of companies listed on the BSE and its total market capitalization have each more than tripled since the bourse began trading five years ago, while trading turnover has increased nearly tenfold, Wu noted.

Editor: Martin Kadiev