China is pushing insurers to invest billions in the latest move to support the market By Reuters
SHANGHAI/HONG KONG (Reuters) – China announced plans on Thursday to pour hundreds of billions of yuan a year into shares of state-owned insurance companies, in the latest government push to prop up capital markets.
Authorities will call on insurers to invest at least 100 billion yuan ($13.75 billion) of long-term funds in stocks in the first half of this year, China Securities Regulatory Commission chief Wu Qing told a news conference.
Regulators will encourage large state-owned insurers to invest 30% of new annual premiums in A-shares and encourage mutual funds to increase the market value of their A-shares by at least 10% annually over the next three years, Wu said.
“Medium and long-term funds play a key role in the capital market as professional investors. They act as a ‘ballast’ and a ‘stabilizer’ to ensure that the market runs smoothly and remains healthy,” he said.
These measures will direct “several hundred billion” into mainland stocks every year and consolidate the positive trend of capital markets, he added.
The plan also includes directing mutual fund managers to increase investment in their own equity products, reduce fund sales fees and promote the development of exchange-traded fund products.
The blue-chip index advanced 0.6% while jumping 1% by midday. Hong Kong added 0.2 percent.
The gauge that tracks insurers jumped 2.6% in morning trade with China Life insurance (NSE: ) up 4.3%.
Beijing is stepping up policy support to shore up the stock market, which has been weighed down by a protracted asset crisis, deflationary pressures and geopolitical tensions.
Six Chinese government agencies, including the central bank and the securities regulator, announced a series of measures on Wednesday to channel medium- and long-term funds into the capital market.
Authorities also introduced swap and re-lending programs totaling 800 billion yuan to buy shares in September, as well as guidelines on market capitalization management to encourage companies to improve shareholder returns.
The latest plan released Thursday echoes previous calls to boost capital markets, said Ben Bennett, Asia-Pacific investment strategist at Legal And General Investment Management.
“It’s not a huge surprise, but it’s nice to see some tangible policies. These things have to go hand in hand with stronger growth and earnings expectations to be fully effective.”
Share prices have been very volatile since the authorities signaled support. The benchmark CSI 300 stock index rose 35% in the two weeks after that first stimulus announcement, but disappointment over the degree and pace of implementation has since cut that gain in half.
($1 = 7.2728)
