By Wang Lan (China Daily)
Updated: 2007-12-03 17:45

The China Banking Regulatory Commission (CBRC) has approved the mainland's first car loan backed securities product, a move widely seen as an indication of the authority's determination to promote the development of the securitization market.

The first car loan-backed securities will be issued jointly by GMAC-SAIC Automotive Finance Co and Fortune Trust & Investment Co. GMAC-SAIC Automotive is the financial service unit of General Motors Corp's joint venture with Shanghai Automotive Industry Corp. Fortune Trust & Investment is a financial subsidiary of Baosteel Group, China's largest steel maker.

Analysts say the introduction of carloan backed securities will expand the scope of securitization products in China and provide another investment alternative other than stocks. Other financial houses are expected to begin selling carloan back securities to investors.

But analysts agree that at the initial stage, carloan backed securities are not expected to be traded very actively because investors are less familiar with the new product and domestic financial institutions have limited pricing power because of low demand for securitized products.

Despite the usual sharp depreciation, analysts say that car loans are not as insecure an asset class as many people may think because car buyers are believed to be relatively well off.

"With the introduction of carloan-backed securities, more product innovations are expected to be made by financial institutions outside banking system and thus improve the efficiency of the whole financial sector," says Huang Dong, an analyst on fixed income securities at Orient Securities.