China announced this Thursdayplans to funnel hundreds of billions of yuan of investment from state insurers into stocks, part of the government’s latest efforts to support a troubled stock market.
The plan, which involves the country’s six financial regulators, including the securities regulator, was first announced on Wednesdayjust as Donald Trump begins his second term as US president.
This announcement comes shortly after Trump’s threat to impose a punitive 10% tariff on Chinese importswhich underlines Beijing’s intention to support markets in a potentially conflictive geopolitical context.
The new measures, which encompass increased investments by insurers and mutual funds, fee reductions and other corporate reform initiatives, are the latest in a series of steps authorities have taken since last September to revive the stock market. with limited success.
The market reaction
Shares rose following China Securities Regulatory Commission (CSRC) chief Wu Qing’s press conference, although gains were modest. The CSI300 index of large companies rose 0.2%, while the Shanghai Composite Index rose 0.6%. Hong Kong’s Hang Seng Index pared its early gains and fell 0.6%. An indicator that tracks insurers rose 3.3%, and China Life Insurance saw a 4.8% increase.
The latest plan reflects earlier calls to promote capital markets, said Ben Bennett, Asia-Pacific investment strategist at Legal And General Investment Management. “It’s not a big surprise, but it’s nice to see some tangible policies. These things need to go hand in hand with stronger growth and profit expectations to be fully effective.s”.
CSRC chief Wu said authorities will urge insurers to invest at least 100 billion yuan ($13.75 billion) of long-term funds in stocks in the first half of this year. Regulators will encourage large state insurers to invest 30% of new annual premiums in A shares, and mutual funds to increase the tradable market value of their A shares holdings by at least 10% annually for the next three years, Wu said.
“Medium and long-term funds play a crucial role in the capital market as professional investors. They act as the ‘ballast’ and ‘stabilizer’ to ensure that the market runs smoothly and remains healthy,” he added. These measures will channel “several hundred billion” into local stocks each year and consolidate the positive trend of the capital market, he added.
china market shanghai stock market
The plan also involves guiding mutual fund managers to increase investments in their own stock products, reduce fund sales fees, and promote the development of exchange-traded fund products.
The plan also involves guiding mutual fund managers to increase investments in their own stock products, reduce fund sales fees, and promote the development of exchange-traded fund products.
Beijing has been stepping up political support to support the stock market, whichhas been burdened by a prolonged real estate crisisdeflationary pressure and geopolitical tensions. The authorities introduced swapping and re-lending schemes totaling 800 billion yuan for purchasing shares in September, as well as guidelines on market capitalization management to encourage companies to improve returns for shareholders.
Stock prices have been highly volatile since authorities signaled support in September. The benchmark CSI 300 index rose 40% in the two weeks following that first stimulus announcement, but disappointment with the extent and speed of implementation has led the CSI 300 index to halve that gain since then. .
Source: Ambito