China will allow more annuity funds to invest in equities

[SHANGHAI] China plans to increase the proportion of the country's annuity funds that can be used to invest in equities, which could inject 300 billion yuan (S$60.84 billion) into capital markets.

The Ministry of Human Resources and Social Security on Wednesday said that as much as 40 per cent of annuity funds could invest in equities in the future, lifting the threshold by 10 per cent to encourage long-term funds to support capital markets.

China's annuity funds, previously limited to domestic markets, will be allowed to invest in Hong Kong-listed stocks under the mainland-Hong Kong stock connect, the ministry said, adding that the move shows Beijing's desire to support and maintain the prosperity of Hong Kong's financial markets.

The investment scope will also be expanded to include preference shares, asset-backed securities, negotiable certificates of deposit (NCDs), perpetual bonds and treasury bond futures, the ministry said.

As of the end of the third quarter, the annuity fund mechanism had covered nearly 66 million employees, with assets of 3.1 trillion yuan, according to the ministry.

During 2007 and 2019 China's enterprise annuity funds generated an average annualised return of 7.07 per cent.

REUTERS