China insurers allowed to invest more in equities and real estate
China Insurance Regulatory Commission plans to allow insurers to increase their stakes in equities and property in bid to boost returns
Kwong Man-ki in Beijing and Sandy Li
The mainland's insurance regulator is planning to allow insurers to invest a bigger share of their portfolios in equities and real estate in the hope it will boost their investment returns.
The China Insurance Regulatory Commission plans to loosen caps on insurers' investments in equities to 30 per cent of total assets from the current 25 per cent, the China Securities Journal reported yesterday, citing draft rules recently sent to insurance companies.
The limit on investments in real estate and infrastructure will also be raised to 30 per cent of insurers' total assets from 20 per cent, the report says.
The CIRC did not respond to queries yesterday.
Equity investment includes listed shares and equity funds. Insurance funds are also allowed to invest up to 10 per cent of their portfolios in private equity and funds.
The loosening of controls over investments in insurance funds in equities will help foster the development of capital markets, according to Chen Xingyu, a Shanghai-based analyst with Phillip Securities.
"Insurers are the major institutional investors in shares listed on the mainland," he said.
The draft rules would also give insurers more flexibility in diversifying their investments, Chen added.
CIRC data shows the annualised investment yield of mainland insurers rebounded to 5.21 per cent in the first five months of this year from 3.39 per cent last year, when the capital market was sluggish.
Wang Xujin, an insurance professor at the Beijing Technology and Business University, said it was now an appropriate time to loosen limits on insurers' equity investments because the capital market had shown a recovery.
"The capital market can better develop with greater participation by insurance funds," he said.
Since property prices were expected to rise over the coming decade, real estate investment would provide good returns, Wang added.
"Insurers have been active in acquiring whole blocks of offices or shopping malls in recent years and the relaxation will certainly give a boost to the commercial investment market," said Thomas Lam Ho-man, a director and head of research and consultancy for Greater China at London-based property consultancy Knight Frank.
The office market in Shanghai was one of the most active property investment markets among investors at home and abroad, and activity in the sector increased dramatically in the second quarter this year, with four significant en-bloc investment deals worth a total of 6 billion yuan (HK$7.6 billion) concluded, according to London-listed international property consultant Savills.
"The office market in Shanghai presents long-term stability and liquidity, while other funds close to the end of their life look to exit and return profits to investors," it said.