China’s top insurers to launch US$7 billion fund to invest in onshore shares in sign of rising state support
- New China Life Insurance and China Life Insurance will each invest US$3.5 billion in the equity fund that will be managed by Honghu Private Securities Investment Fund
- The fund is aimed at increasing longer-term investment assets that suit the company’s strategy and improve the efficiency of capital use, New China Life says
Two state-backed Chinese insurance firms plan to launch a joint 50 billion yuan (US$7 billion) private fund to invest in yuan-denominated shares as policymakers ramp up support for the struggling stock market.
The stock fund is aimed at increasing longer-term investment assets that suit the company’s strategy, optimising the structure of assets and liabilities and improving the efficiency of capital use, New China Life said. It did not provide details about the investment scope of the fund.
Central Huijin Investment, a unit of China’s US$1.35 trillion sovereign wealth fund, owns a 31 per cent stake in New Life Insurance. China Life, which did not issue a statement on the fund formation, is controlled by the finance ministry.
The fund will mainly invest in China’s onshore listed companies with good corporate governance and stable business operations, according to Huatai Securities. Both New China Life and China Life did not answer calls made by the Post seeking comment.
“The private fund is expected to focus on the equity market in response to policymakers’ call,” said Liu Xinqi, an analyst at Guotai Junan Securities in Shanghai. “That comes against the backdrop of regulators urging financial institutions to be a bulwark of the industry and guide long-term insurance investments into the market.”
The move by the two state-backed insurance firms adds to evidence that support for China’s US$9.7 trillion stock market is well under way.
Chinese stocks set unwanted records as 2023 losses stun market bulls
So far, a raft of market-boosting measures by policymakers, from the cut in the stamp duty to state buying of banking stocks and exchange-traded funds, have done little to restore investors’ confidence.
The benchmark CSI 300 Index fell 2.1 per cent in November, a fourth straight monthly decline. The gauge has slumped 9.7 per cent this year, the worst-performing equity benchmark globally after the Hang Seng Index. That has come amid a loss of momentum in the economic recovery following the country’s reopening after three years of Covid and a retreat by foreign investors amid higher interest rates in the US.
An official purchasing managers’ report released by the statistics bureau on Thursday showed manufacturing shrank for a second consecutive month in November.
Shares of New China Life rose 0.6 per cent to 31.25 yuan in Shanghai on Thursday and China Life’s shares gained 0.2 per cent to 30.04 yuan.
The creation of the new fund will help to reduce fluctuations in the insurers’ profits triggered by market volatility, as the investments are booked long-term under accounting principles that are not immediately reflected in the income statements, according to Guotai Junan.
New China Life posted a loss of 440 million yuan in the third quarter and China Life’s net income slumped 99 per cent from a year earlier, with both blaming the weak performance on market volatility.
