China asks big insurers to invest more in stocks

China’s financial regulators yesterday unveiled a slew of measures to urge large state-owned mutual funds and insurers to purchase more shares, as Beijing seeks to bolster the faltering stock market.

Big state-owned insurance firms are guided to raise the size and proportion of their investment in shares listed on the mainland, and to allocate 30 percent of their newly generated premiums to buying stocks, Wu Qing, chairman of the China Securities Regulatory Commission said at a press conference yesterday.

A pilot programme, due to kick off in the first half of this year, will channel at least 100 billion yuan (US$13.75 billion) from insurers to long-term stock investment, Wu said. He expected the programme to continue being expanded and inject at least “hundreds of billions of yuan” every year into stock purchases.

Mutual funds are also mandated to raise their holdings in mainland-listed shares by 10 percent annually, in terms of market valuation, for the next three years, he said.

A consortium of six financial regulators, including the securities regulator, first floated the plan on Wednesday to direct large funds, including pension funds, to buy more local shares, aimed at “steadying the stock market,” according to CNBC’s translation of a statement in Chinese from the regulators.

“Having institutions like insurers hold more China’s equities helps to lower volatility and create a more stable trading environment based on fundamentals,” said Eugene Hsiao, head of China equity strategy at Macquarie Capital. — CNBC.