China Financial Instruments Innovation Report (2005)

Author: Yang Ruyan
Publisher:
Publish Date: 2005-07-01
Features: "The Report on Financial Instrument Innovation in China" is published annually. The book focuses on the theme of financial instrument innovation, summarizing and analyzing the innovations in various financial sub-markets such as government bonds, corporate bonds, funds, trust products, convertible bonds, banking services, enterprise annuities, insurance, and futures for the current year. It extracts their risk-return structure characteristics and investment value. The book contains a wealth of valuable data on the operation of financial markets. Its descriptions and analyses of the mechanisms, features, and future trends of product innovations in each sub-market provide significant help for the innovation practices of market participants, the improvement of targeted regulatory policies, and related academic research.
Key Points:
● The structural characteristics of the macro economy led to a significant divergence in the relative investment value among domestic industries in 2004, as capital showed a strong motivation to circumvent regulations and flowed into upstream industries such as coal, electricity, oil, and transportation, as well as industries with synchronized resonance effects.
● Although the tight monetary policy and the phasing out of the active fiscal policy only had a nominal effect, the expectation of interest rate hikes forced fixed-income products to alter their contract designs to enhance their yield characteristics. Additionally, liquidity constraints profoundly changed the wealth management models of market participants.
● Cooperative regulation achieved a certain breakthrough in 2004, with money market funds, corporate bonds, banking services, and trust products all yielding substantial returns.
● The relative strength changes in the trends of various financial sub-markets prompted investors to continuously adjust their investment portfolios and strategies. The sustained sluggishness of the stock market made it difficult for institutional investors to find suitable investment products in equities to meet risk-aversion demands during prosperous periods, leading most institutions to seek investment opportunities in income securities and counter-cyclical consumer assets. Discussions on financial security and foreign investors' positive expectations about China's economic growth prompted the development of a series of financial instruments to prevent foreign capital shocks.