CHINA will allow insurers to double the share of assets invested in local entities to 10 percent after the stock market surged 87 percent this year, said industry executives briefed by the insurance regulator.
The China Insurance Regulatory Commission has told the asset management arms of insurance firms to prepare for buying more domestic stocks, said the three people, declining to be identified as the regulator hasn't announced the plan.
The move will help China Life Insurance Co, the world's third-largest insurer by market value, Ping An Insurance Co and rivals boost returns from their US$321 billion of assets as premium growth slows, Bloomberg News said. Insurers may use some of the funds to invest in companies traded in Hong Kong that are planning to sell yuan-denominated shares in China.
"This is aimed at increasing the profits of the insurers," said Huang Huamin, a Beijing-based analyst at Citic Securities Co. "It's also to prepare for the return" of Hong Kong-incorporated and listed companies that are substantially owned by the Chinese government, known as red chips.
The insurance regulator didn't immediately reply to faxed questions. Spokespeople at China Life and Ping An either declined to comment or weren't immediately available.
China's CSI 300 Index rose 0.5 percent yesterday, bringing gains this year to 87 percent - the second-best performance among the world's major benchmarks. The Hang Seng China-Affiliated Corporations Index, comprised of Chinese mainland companies incorporated and traded in Hong Kong, gained 2.6 percent. The measure has jumped 18 percent in the past month.
Red-chip companies include China Mobile Ltd, the world's largest mobile-phone carrier by users; CNOOC Ltd, China's biggest offshore oil explorer; and Lenovo Group Ltd, the world's third-biggest personal computer maker.
Chinese rules do not allow offshore-incorporated companies to trade their shares on the domestic markets in Shanghai and Shenzhen. Mainland incorporated companies traded in Hong Kong are called H shares.
The government in the past year has been encouraging its biggest H-share companies to sell shares at home.