Overseas investment by mainland insurers picks up momentum

Insurers invested 166.7bn yuan in the first three quarters of the year – that’s already more than double the 71bn yuan invested in the whole of last year

PUBLISHED : Wednesday, 09 November, 2016, 8:22pm
UPDATED : Wednesday, 09 November, 2016, 10:49pm

Overseas investment by mainland insurers has picked up momentum this year, as they accelerate their buying of assets, according to fresh data released on Wednesday.

International investment accounted for about 2 per cent of mainland insurers’ total assets, still far from the regulatory cap of 15 per cent.

According to the figures from ciicapital.com, a website that tracks the insurance industry, domestic insurers invested 166.7 billion yuan in the first three quarters of the year – that’s already more than double the 71 billion yuan invested in the whole of last year. Real estate investment accounted for 91 per cent of the deals.

“The stronger momentum was boosted by a growing expectation of a weaker yuan, the economic slowdown, worsening assets quality at home and expectations of stable returns on commercial real estate such as office and hotels overseas,” said Kevin Fang, general manager of ciicapital.com, in Shanghai on Wednesday.

Overseas investment is impeded by foreign exchange controls and bets on domestic stocks speculation can be very risky and face tighter supervision from regulators
Tian Dan, Soochow Securities researcher

However, he also noted that tighter foreign exchange controls could slow the pace of deals involving large sums of cross-border capital outflow.

Against that background, analysts now expect insurers could turn to the Shanghai-Hong Kong stock link, and its upcoming cousin, the Shenzhen-Hong Kong link as limited authorised channels.

The China Insurance Regulatory Commission said in September it was allowing insurers to participate in the Shanghai stock link.

Tian Dan, a Soochow Securities researcher, said domestic insurers will eventually have to accept the reality of lower investment returns amid China’s persistent low-interest rates at home.

“Overseas investment is impeded by foreign exchange controls and bets on domestic stocks speculation can be very risky and face tighter supervision from regulators,” said Tian.

“While there are not too many options on the assets side, insurers are under pressure to take it really seriously to control their liability to maintain profit margins.”

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