The Research Of Solving High Discount Problem Of Close-End Fund By Using Warrants

Presently,close-end funds which listed in Shanghai & Shenzhen stock exchanges have exchanged under 70% discount. According to the data of oversea markets,there are usualy only 90-95% discount. The one main reason of the difference is immature investment environment of internal capital market. Another reason is the limitation of fund system and absence of moral in fund managers. These factors result in investment reducing that is harmful to the development of fund industry.Along with rapidly developing in China's capital market, finance innovation and creative products are emerged in endlessly. The warrant,issued by Shanghai Baoshan Iron & Steel Co.,Ltd,is listed in Shanghai Stock Exchange in August 2005. Subsequently,warrant transaction is involved in crazy speculation. Shanghai Stock Exchange issued the rule of creating warrants for enforcement to restrain speculation. All acts doesn't gain its ends.Based on that two facts above,I prefer to make a plan to solve the two problems both discount and speculation. The administrator should permit securities broker corporations issuing warrants by using funds or cash as mortagage.The warrant is a finance investment tool. It can be used as a part of an investing combination,such as hedging with stock index futures. It will also help to acquire the experience of issuing other warrants.The article is made to keeping away and managing the risk for both the administrator and the brokers by analyzing the ingredient and generant reason of warrants.