China insurance regulator allows more funds to flow into blue-chip stocks

The China Insurance Regulatory Commission (CIRC) will permit insurance companies to invest premiums earned from older policies in blue-chip stocks in a trial programme, the official Shanghai Securities News reported on Thursday.



As initial public offerings (IPOs) resume in China after a year-long freeze, the regulatory move could allow 360 billion yuan ($59.5 billion) to flow from insurance funds into local stock markets, the newspaper estimated, as Chinese stock indexes continue to struggle.



Citing a statement that appeared on the regulator's website on Wednesday, the paper said that under the trial programme, premiums from insurance policies sold before 1999 can be reinvested in shares in large, stable listed companies. Insurers must meet certain conditions and use separate accounts to participate for the programme.



The move followed a similar announcement by the CIRC saying pension funds would be allowed to invest in the small-capitalization ChiNext market, hosted on the Shenzhen exchange. That announcement sparked a 3.3 percent rally on the Nasdaq-style board on the same day.



But regulators have had a more difficult time convincing Chinese investors to put money into blue-chip tickers in recent years, as investors have preferred shorter plays on more volatile shares in small companies.



This has frustrated Beijing, which wants more money to flow into key companies, in particular banks, and also wants to convince retail stock investors to bet on long-term growth instead of short-term returns.



Source Reuters