Chinese insurers are expected to directly invest up to 10 percent of their total assets in the stock market, up from the current 5 percent, an insider familiar with the situation was cited as saying by Shanghai Securities News yesterday.
At the moment the annual stock investment of an insurer cannot exceed 5 percent of the total assets it reported at the end of the previous year. "In the long run a positive and steady 5-percent rise is likely," the insider was quoted as saying.
Last year the guidelines on the split share structure reform of listed firms were jointly issued by five government departments: China Securities Regulatory Commission, State Assets Supervision and Administration Commission, Ministry of Finance, People's Bank of China and Ministry of Commerce. They promised that investment proportions in the stock market would be increased for large institutional investors including insurance companies.
China Insurance Regulatory Commission chairman, Wu Dingfu, said this June that the 5-percent investment proportion could be raised within the year.
In theory, a 10-percent investment proportion means that over 150 billion yuan (US$18.75 billion) of insurance funds will be directly invested in the stock market. Adding indirect investment through investment funds, the figure will amount to over 330 billion yuan (US$41.25 billion).
For the securities market, the policy will not only bring more capital into the market but also help optimize the structure of institutional investors in the market, according to the insider.
He said: "Currently, institutional investors invest mainly in open-ended funds that are not so diversified. What's more, investment funds often make short-term investments for liquidity reasons and this has sometimes contributed to temporary surges or falls in the stock market."
"In contrast," he continued, "insurance assets are entitled to long-term use of the capital and therefore aim for long-term proceeds, which will help stabilize the stock market."
Statistics show that by the end of June, insurance funding had invested 40.2 billion yuan (US$5.03 billion) in listed companies' shares, an increase of 186 percent from the year's beginning. China Life accounted for the bulk of the investment with over 18 billion yuan (US$2.25 billion).
First-quarter statistics also showed that the number of shares and their market value held by insurance companies had risen by 109 percent and 95 percent respectively from the end of last year.
Direct investment in the stock market can also boost investment returns for insurers. According to Tianxiang Investment Consulting Company, the share value held by insurance companies has surged by an average high of 95 percent since the beginning of this year. This is well above that of big board shares during the same period.
It's reported that currently, stock investment accounts for less than 3 percent of the insurance companies' total investment value, which is far below the 30 percent in the US in 2004.
(China.org.cn by Yuan Fang, August 16, 2006)