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Beijing has ordered China’s insurance companies to buy more publicly traded shares to support the ailing stock market.
The China Insurance Regulatory Commission summoned the heads of China’s largest state-controlled insurance groups on October 17 for a meeting on how to respond to the financial crisis. It involved an order to insurers to play a stabilising role in the stock market, according to people familiar with the agenda.
The direction came in spite of plunging profits at all of the largest insurers and widespread redemptions of investment-linked products.
“CIRC has always been actively supportive of various measures for stabilising the capital markets,” the regulator said in a statement to the Financial Times. “Insurance institutions should function as institutional investors, supporting the steady development of the capital market through moderate operations.”
China’s stock market has dropped 66 per cent this year despite policy measures including reduced trading taxes and direct government purchases to support prices.
“As the whole country is struggling with the financial crisis, every ministry and agency has a responsibility to contribute to helping the market,” an official at another regulatory agency said, speaking on condition of anonymity.
Chinese insurers have sharply reduced their net sales of publicly traded stocks since the October 17 meeting, according to figures published in state-controlled media.
Chinese insurers are relatively small participants in the stock market because of government-imposed restrictions, and analysts say they are likely to have only a marginal impact on prices.
“This is like pumping oxygen into a patient who had a traffic accident. It may keep the market alive but can’t fix what ails it,” Dorris Chen, an analyst at BNP Paribas, said. “The intended audiences for this move are the central government and retail investors.”
China Life Insurance, Ping An Insurance and China Pacific Insurance, the country’s three largest insurers by market share, reported large falls in third quarter profits from a year earlier, driven by investment losses from the stock market decline.
China Life said on Tuesday third-quarter net profit fell more than 70 per cent from a year earlier to Rmb2.34bn ($342m). Ping An Insurance, which is 17 per cent owned by HSBC, reported a third-quarter loss of Rmb7.88bn under international accounting rules.
By Jamil Anderlini in Beijing