(Yicai Global) Sept. 19 -- The market value of exchange traded funds listed in the Chinese mainland has exceeded CNY1 trillion (USD142.8 billion) for the first time.

The total net asset of the 674 ETFs traded in the mainland, which include stock funds launched by so-called qualified domestic institutional investors, was CNY1.08 trillion as of Sept. 16, statistics from financial information provider Wind Information showed.

Shanghai Securities Exchange 50 Index ETF, the first ETF issued by China Asset Management on the Chinese mainland, was released in 2004. By 2017, market-wide ETFs were worth only CNY196.3 billion (USD28 billion), with their size more than tripling since the end of 2019.

Various forces propelled the high-speed development of ETFs in China, said Zhang Hongtao, general manager and administrative head of the quality investment division at the CAM, China Fund reported yesterday.

"Changes occurred to the investment structure, with mainland investors further aligning with overseas peers in terms of mindset," Zhang noted. "Index investment also gained traction amid increased effectiveness of the mainland market, and ETFs' advantages of relatively high transparency and low fee rate became more visible."

"Growing institutional investors and enhanced assets allocation provided a solid foundation for ETFs' quick development," Zhang added. "Moreover, ETFs' development was also promoted by the transaction and subscription redemption mechanism under sustained improvement and the quick development of futures options derivatives, both strongly supported by regulators and bourses."

In the Chinese mainland market, thematic index ETFs seized 47 percent of the market, followed by market value-weighted index ETFs and industrial index ETFs with shares of 21 percent and 9 percent, respectively. The board-based index made up a larger part of overseas ETF markets.

Demand for funds is still at a relatively initial stage, with investors using ETFs to replace stocks and indexes to conduct swing trading, according to Guo Beibei, senior index fund manager and assistant to the director of China Universal Asset Management's index and quantity investment division. Industry-themed ETFs with higher sharpness can better meet investors' demand for directional Beta factors, she said.

But the Chinese ETF market is still very far from the US one, which has a size of USD5.66 trillion, and also that of Ireland and Japan, said Zhao Yunyang, investment director at Bosera Asset Management's index and quantity investment division. This means that there is room for future development, he added.

Editor: Futura Costaglione