Asset-backed Securities

 

SZSE launched its first corporate asset securitized product in December 2005 and provided trading service for the product through its comprehensive negotiated trading platform (block-trade system).

 

Asset-backed securities are a direct financing practice. The issuer offers high quality assets with a stable cash flow as underlying assets; a securities firm offers a specific asset management plan as a special purpose vehicle. The securities firm issues asset-backed certificates to investors and uses the trusted fund to purchase the underlying assets from the issuer. The return from the underlying assets is distributed to the certificate holders.

 

For the issuer, financing by asset-backed securities realizes risk isolation between the underlying assets and the enterprise. The securitized product can receive a higher credit rating thanks to the cash flow from the high quality assets, thus reducing financing costs. Meanwhile, the financing size becomes more flexible and corporate disclosure requirements are less stringent.

 

For investors, the securitized product has a specific maturity and stable return rate, similar to a fixed-income product. Investors can hold to the maturity after subscription or trade the product on the secondary market.

 

Before listing, SZSE reviews and assesses the securitization project proposed by the securities firm, and submits its opinion to the CSRC. After listing, SZSE will provide liquidity arrangement for the product through the negotiated trading system.


The SZSE has been striving to improve the innovation capability of asset backed securitization. By the end of Jan, 2016, the SZSE has listed 272 ABS products, with free float cap of USD 12.1 billion.