Chinese insurers’ stock buying bolsters case for slow bull run
Rising demand from long-term investors will be key to reviving market sentiment and help sustain the rally’s momentum
[HONG KONG] Chinese insurance firms have increased their equity exposure to the highest level in at least three years, heeding Beijing’s call to build a slow and steady bull market.
Equity holdings by the cohort rose 640 billion yuan (S$115 billion) in the first six months of the year to 3.1 trillion yuan, according to regulatory data, the highest level since 2022. Brokerages expect more buying, with Morgan Stanley estimating that insurers will plough more than one trillion yuan into China and Hong Kong shares this year.
The wave of purchases marks the latest show of confidence in a market that’s posted world-beating gains thanks to continued policy support. Last month, the onshore benchmark rallied 10 per cent to rank among the top performers globally. Rising demand from long-term investors will be key to reviving market sentiment and help sustain the rally’s momentum.
“Insurance flows are reshaping market dynamics,” said Eva Lee, head of Greater China equities at UBS Global Wealth Management. The steady inflow of long-term capital is enhancing market depth and their preference for dividend-paying stocks and sector leaders also contribute to more stable pricing, she added.
While the lion’s share of insurers’ assets remained in bonds, equities made up 8.5 per cent as at the end of June – the highest proportion in National Financial Regulatory Administration records going back to 2022. Ping An Life Insurance Group tripled its holdings of Agricultural Bank of China this year to about one-sixth of its Hong Kong-listed shares.
Morgan Stanley analysts expect the flows into equities to continue into 2026. Meanwhile, Bloomberg Intelligence estimates that insurers’ stock holdings may gain one trillion yuan to 1.5 trillion yuan by the end of next year from closing levels in June.
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China’s insurers have long played an important role in the country’s financial markets, allocating their portfolios across a mix of assets. But a regulatory push to stabilise the battered market helped spur a reallocation of capital this year, with officials mandating that large state-owned firms allocate 30 per cent of new policy premiums to onshore equities.
Authorities have also raised insurers’ equity investment cap, reduced their capital requirements to hold stocks and improved their ability to weather market volatility.
Beyond the regulatory window guidance, the increase in equity holdings reflects deepening troubles in China’s property sector and related assets, of which some have become “uninvestable”, said Winnie Wu, chief China equity strategist at BofA Securities in Hong Kong. “Insurance has become a very important long-term capital to sort of anchor the market valuation and liquidity” for the onshore and Hong Kong’s market, she added.
High-yielding shares, along with tech and new economy stocks, are favoured by some insurers. Low interest rates and bond yields might have prompted some firms to boost returns by investing in stocks, said Chaoping Zhu, a Shanghai-based global market strategist at JPMorgan Asset Management.
But insurers’ bigger footprint in stocks comes with risks. “Increased equity exposure can lead to greater fluctuations in net asset value, especially during market downturns,” said UBS’ Lee.
In the first half, China Life Insurance’s profit rose 6.9 per cent from a year ago, partly due to a net investment income jump of 317 per cent to 63.7 billion yuan. Ping An’s profit fell 8.8 per cent in the same period, dragged by a 20 per cent decline in investment income to 52.4 billion yuan.
Still, as more insurers return to the market and China’s stock recovery gains traction, those pressures are likely to ease over time.
“It’s a structural story and we are only in the second inning of this transitional phase,” said Steven Lam, an analyst at Bloomberg Intelligence. BLOOMBERG
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