Chinese insurance regulator in bid to boost ChiNext market
Move to allow insurers to invest in growth enterprises seen as providing new fund source
The mainland's move to allow insurance companies to buy ChiNext shares is meant to provide a fresh source of funds for the stock market, but analysts doubt insurers will be interested in growth enterprises.
The valuation of stocks trading on Shenzhen's ChiNext board, a Nasdaq-style market for growth enterprises, was not attractive, said Chen Xingyu, an analyst with Phillip Securities.
He said insurers could instead cash in on companies seeking initial public offerings, which are resuming after a halt of more than a year.
"The relaxation to allow Chinese insurers to buy ChiNext shares came at the right time, when the IPO market is about to resume," Chen said. "More funds will be needed to support the market when there will be more financing activities, and insurers have been the major institutional investors in the market."
The China Insurance Regulatory Commission announced on Tuesday that insurers could invest in ChiNext stocks. They will be required to report if their shareholdings in a single company reach 5 per cent. However, they should avoid companies that are under regulatory investigation or have been punished or censured within the year.
"Insurers are conservative in their investment strategies, while investing in growth enterprises is riskier," Chen said. "They may not be so willing to pour too much money into the ChiNext market."
Insurers' holdings in stocks and equity funds amounted to 755.6 billion yuan (HK$967.3 billion) at the end of November, accounting for 10.1 per cent of their total assets, according to CIRC data. Currently, insurers' equity investment is capped at 20 per cent of their assets.