China channels pension, insurance funds into nation’s A shares to anchor stock market

China’s financial regulators are channelling pension and insurance funds into the nation’s equities to establish medium and long-term holdings and stabilise Asia’s largest capital market.

Starting this year, 30 per cent of the annual insurance premium earned from new coverage policies will be put into yuan-denominated A shares, said Wu Qing, the chairman of the China Securities Regulatory Commission, during a press conference in Beijing.

Pensions will also be directed to put their funds in equities, with the allocations increasing by 10 per cent every year over the next three years, Wu said.

The directives will deliver a much-needed jolt to the capital market, which had been beset with malaise over a lackluster economy, a prolonged property slump and tepid corporate earnings.

Insurers’ allocations in the stock market totaled 4.4 trillion yuan, about 12 per cent of their assets, according to Xiao Yuanqi, the vice chairman of the National Financial Regulatory Administration. At least 100 billion yuan (US$13.8 billion) of insurance funds will be allocated for the stock market in a pilot programme within the first six months, half of which will be approved before the Lunar New Year that commences on January 29, he said.

The CSI 300 index, which tracks the 300 largest stocks on the Shanghai and Shenzhen exchanges, jumped 1.1 per cent in early trading after Wu’s announcement.