Deal allows mainland insurers to invest in HK
Mainland insurers will be encouraged to set up asset management firms in Hong Kong to invest in stocks and bonds after regulators signed a landmark agreement yesterday.
Analysts say the agreement will boost the return of mainland insurers such as China Pacific Insurance and China Re, which face slowing investment returns at home, as well as help support the flagging Hong Kong stock market and fund industry.
The agreement signed in Beijing is the first of its type between Securities and Futures Commission chairman Eddy Fong Ching and China Insurance Regulatory Commission vice-chairman Li Kemu and allows them to provide regulatory assistance to each other and exchange information about their licensed brokers and fund mangers.
The insurance regulator said the agreement was an important step letting insurers invest overseas through the qualified domestic institutional investor scheme, a plan announced last year allowing them to invest up to 15 per cent of assets in global equities.
'This is the first regulatory co-operation agreement on the use of insurance funds outside the mainland,' Mr Li said.
A regulatory source said the CIRC would prefer mainland insurers planning to invest overseas to first apply to the SFC for fund management licences in Hong Kong.
'It is important for the SFC to be able to help the CIRC monitor the behaviour of the mainland insurance companies' investment arms in Hong Kong,' the source said. 'This will also allow mainland insurers to use Hong Kong as a platform to learn international market practices.'
The source said that although the CIRC announced the QDII plan in July last year, only China Life Insurance and Ping An Insurance (Group) had so far set up asset management companies in Hong Kong to do such investments.
'The CIRC is worried that if it lets all mainland insurers set up asset management firms overseas, they would lose control,' the source said. 'They therefore let the two big insurance companies test the waters first.'
The deregulation is expected to release up to 380 billion yuan (HK$421.57 billion) of insurance funds into overseas stock markets, a move that Louis Tse Ming-kwong, a director of VC Brokerage, said would help the Hong Kong market.
'The insurance companies usually invest in a conservative manner and they may invest only in blue chips or some bond funds,' he said. 'But they will become long-time institutional investors in Hong Kong.'
Sally Wong, an executive director of the Hong Kong Investment Funds Association, said the agreement was a testament of the city's robust regulatory framework.
Ms Wong added some small insurers might opt for mandated Hong Kong fund houses to invest for them instead of setting up their own asset management firms.