China Unveils Second Round of Insurance Companies to Boost Stock Market
In a move to stabilize and strengthen the stock market, Beijing has announced a second list of insurance companies participating in a long-term equity investment pilot project. The National Financial Regulatory Administration (NFRA) has approved the second batch of projects, worth 52 billion yuan (US$7.2 billion), which will inject much-needed capital into the market.
Key Players Join the Initiative
The list of approved insurance companies includes China Pacific Insurance, Taikang Life Insurance, Sunshine Life Insurance, and relevant insurance asset-management companies. These entities will participate in the pilot program through contractual funds, which will be managed according to predefined terms and objectives outlined in a contract.
Stabilizing the Capital Market
The insurers are expected to play a crucial role in supporting the stable operation of the capital market by leveraging their long-term and patient capital. This move comes at a critical time, as the market faces uncertainties amidst the start of Donald Trump’s second term as US president.
Action Plan to Boost Holdings
Last week, China’s six financial regulators issued an action plan calling on institutional investors, including mutual funds, insurance companies, and social-security funds, to increase their holdings in Chinese stocks. The plan aims to boost investor confidence and stabilize the market. Large state-owned insurers are expected to invest 30% of new annual premiums into A shares, while mutual funds will raise their holdings by at least 10% annually over the next three years.
Potential Influx of Capital
According to UBS, these measures could lead to an influx of US$236 billion this year, providing a much-needed boost to the market. The NFRA has announced that the second batch of insurance funds is set for 100 billion yuan, with subsequent batches expected to gradually increase in scale.
Previous Efforts to Support the Market
In October 2023, the first batch of long-term insurance investment pilots was approved, with China Life Insurance and New China Life Insurance launching securities investment funds totalling 500 billion yuan. Over the past year, Beijing has taken various measures to support the stock market, including introducing swap and relending programs totalling 800 billion yuan to enable financial institutions to increase stock purchases.
Market Performance
Chinese stocks experienced a bull run in the final quarter of 2024, buoyed by the stimulus measures introduced in September. However, much of that gain has since been erased, highlighting the need for continued support to stabilize the market.
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