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BIZCHINA / Center

China to allow more insurance funds into stock market

By Song Hongmei (Chinadaily.com.cn)
Updated: 2007-07-17 16:38

China will allow insurance companies to double the proportion of assets
they may hold in domestic stock markets in a plan that is expected to be
announced at an insurance working conference held today.

Insurance companies will now be allowed to invest 10 percent of their
assets in the stock market; the previous cap was?five percent.

Industry executives of some insurance companies said they have been told
either via email or fax to prepare to buy more stocks by the China
Insurance Regulatory Commission (CIRC), the country's industry watchdog.

The move is part of a government effort to broaden the scope of
investment channels for insurers, who currently have most of their assets
in low-yield bank deposits and bonds.

Given that domestic insurers' assets totaled 1.97 trillion yuan (US$260.5
billion) by the end of 2006, the move could potentially release up to 200
billion yuan into the domestic stock market. By 2010, the total assets of
Chinese insurers may hit 5 trillion yuan and 500 billion yuan will be
invested in stocks.

The capital market has become a primary channel for insurers to diversify
their investments. And at the same time the proportion of bank savings
keeps being reduced.

Last year, bonds, stocks and funds represented about half of investment
on behalf of insurance companies and more than 60 percent of investment
by some life insurers.

Statistics also showed that by the end of 2006, insurers' stock
investments were almost five times that of the beginning of last year to
reach 92.92 billion yuan, and insurance funds in bonds and funds dropped
17.61 percent to 91.21 billion yuan over the same period.

(For more biz stories, please visit Industry Updates)

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