China orders funds, insurers to boost stock holdings amid market slump

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China orders funds, insurers to boost stock holdings amid market slump

Insurance News

By Camille Joyce Lisay

The Chinese government is urging local mutual funds and insurers to increase their stock investments, aiming to improve its struggling equity market amid escalating trade tensions with the United States.

The China Securities Regulatory Commission has mandated that mutual funds increase their holdings of onshore equities by at least 10% annually over the next three years.

Concurrently, large state-owned insurers have been instructed to allocate 30% of their new policy premiums towards domestic stock investments beginning in 2025.

These directives follow a series of government-initiated measures aimed at stabilizing the stock market. Recent efforts include expanding pension fund investments in listed companies and establishing a central bank facility to provide liquidity for equity purchases by securities firms, funds, and insurance companies.

While the initial market reaction to these announcements was positive, with the CSI 300 Index experiencing a temporary surge, analysts cautioned against misplaced optimism.

Analysts note that these measures are intended to stabilize the market rather than instigate substantial growth. Achieving significant market gains would likely require more substantial economic stimulus measures.

Chinese equities have faced considerable pressure in recent months, grappling with concerns over economic slowdown and the threat of increased tariffs imposed by the United States. These concerns have significantly impacted investor sentiment, leading to a bear market for the MSCI China Index.

The government's latest directives, while potentially positive for the market, are not expected to fundamentally alter the current trajectory.

However, these measures are anticipated to disproportionately benefit companies with high dividend yields, particularly those within the state-owned enterprise sector.

Effectiveness of these measures in stabilizing the market remains to be seen. Various factors, including the geopolitical tensions, the pace of economic recovery, and implementation of government stimulus measures, will impact the performance of the Chinese stock market.

How effective do you believe these measures will be in the long run? Share your thoughts in the comments below.

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