China’s financial regulator Thursday introduce a series of measures Big state-owned mutual funds and insurance companies are being urged to buy more shares as Beijing seeks to shore up faltering stock markets.
Guide large state-owned insurance companies to increase the scale and proportion of investment in mainland listed stocks, Allocate 30% of newly generated premiums Wu Qing, chairman of the China Securities Regulatory Commission, said at a news conference on Thursday that stocks will be bought.
Wu said a pilot program to be launched in the first half of this year will channel at least 100 billion yuan ($13.75 billion) from insurance companies into long-term stock investments. He expects the program to continue to expand, injecting at least “hundreds of billions” into stock purchases each year.
mutual funds also Authorized to increase holdings He said that in the next three years, based on market valuation, mainland listed stocks will rise by 10% per year.
An alliance of six financial regulatorsRegulators including the securities regulator on Wednesday proposed for the first time plans to guide large funds such as pension funds to buy more local stocks in an effort to “stabilize the stock market,” according to a Chinese translation of the regulator’s statement translated by CNBC.
Eugene Hsiao, head of China equity strategy at Macquarie Capital, said: “Having institutions such as insurance companies hold more Chinese stocks can help reduce volatility and create more stable trades based on fundamentals. environment.”
He said the latest moves would help “build more attractive long-term investment options” after the housing market collapse damaged household wealth.
After the press conference, the benchmark CSI 300 index rose more than 1.8%, narrowing the index’s decline this year to about 2.7%, according to data from the London Stock Exchange.
Although the CSI 300 Index Last year’s annualized income was 15%, The index ended the year down nearly 12% from its highest level for the year.
Beijing’s recent piecemeal stimulus measures have dashed investors’ hopes that the troubled economy will turn around in the near term, prompting a flood of money into safe government bonds and pushing yields to record lows.
In October, the People’s Bank of China launched Interchange facility program for insurance companies It is easier for brokerages to buy stocks and relatively cheap central bank bills to help listed companies buy and buy back shares.
Dividend payments and share buybacks by Chinese companies hit record highs last year, Wu said, while listed companies were encouraged to increase dividend payments ahead of the Chinese New Year later this month.
Wu pointed out that the current dividend yield of the CSI 300 reaches 3%, which is “significantly higher than the 10-year government bond yield.” On Thursday, the benchmark 10-year Treasury note yield was 1.671%.
Raymond Raymond, China equity strategist at UBS, said Thursday’s announcement is expected to lead to an influx of capital into Chinese “value stocks,” which are considered severely undervalued given their huge potential for future growth.
Xiao Yuanqi, deputy director of the State Administration of Financial Supervision and Administration, said that about 12% of insurance companies’ assets are stocks and other equity funds, equivalent to more than 4.4 trillion yuan.
As of 2023, more than half of insurers’ assets will be bonds and bank deposits, according to the latest data from UBS. Data show that stocks alone accounted for 7% of insurance company assets at the time.
“Efforts to stabilize the stock market are mainly to reduce the negative wealth effect on household consumption,” said Qian Disi, Hong Kong equity research strategist at Galaxy International. She estimates the policy’s impact on capital flows in the A-share market with a free float market value of 78 trillion yuan. “Quite small”.
—CNBC’s Evelyn Cheng contributed to this report.
