On September 24th, at the press conference held by the State Council Information Office on "Financial Support for High-Quality Economic Development," guiding medium and long-term capital, including insurance funds, into the market became one of the key topics.
This includes supporting qualified insurance institutions to establish private securities investment funds and creating new tools such as "swap facilities" for securities, funds, and insurance companies.
These new policies and concepts directly benefit the equity investment of insurance companies and boost confidence, as can be seen from today's market trends.
The real strength of the A-share market is undoubtedly the greatest attraction for insurance funds.
On September 24th, the Shanghai Composite Index and the Shenzhen Component Index closed up by 4.15% and 4.36%, respectively, and the SW Insurance Index rose by 5.56%.
Among these positive news, the "support for qualified insurance institutions to establish private securities investment funds" mentioned by Li Yunze, the director of the National Financial Regulatory Administration, has sparked interest among many insurance capital insiders.
"We want to strive for this qualification," said a senior executive of a large insurance company in response to a reporter from Yicai.
Creating new tools to boost confidence, Pan Gongsheng, the governor of the People's Bank of China, announced several important policies at the beginning of the conference, including the creation of "swap facilities" for securities, funds, and insurance companies, a new monetary policy tool to support the stability of the stock market.
Pan Gongsheng stated that this "swap facility" refers to supporting qualified securities, funds, and insurance companies to obtain liquidity from the central bank through asset pledges.
This policy will greatly enhance the institutions' ability to obtain funds and increase their stock holdings.
An industry analyst said that the "swap facility" monetary policy tool is a new thing.
Insurance funds can use assets such as bonds, stock ETFs, and constituents of the CSI 300 as collateral to exchange for high-liquidity assets such as government bonds and central bank bills from the central bank.
The funds obtained through this tool can only be used to invest in the stock market.
The initial operation scale is 500 billion yuan, and the scale can be expanded in the future depending on the situation.
Insurance companies originally used repurchase transactions to slightly leverage, with trading counterparts in the interbank market, and the use of funds is unlimited.
"Swap facilities" take the central bank as the trading counterpart, leverage funds for stock investment, and the effect remains to be observed.
"This innovative policy still gives us more policy tool choices and space, and also boosts market confidence," said an investment head of an insurance institution to Yicai.
"However, while focusing on liquidity, the challenge of returns on insurance capital investment is greater at this stage."
Data from the National Financial Regulatory Administration shows that in the second quarter of this year, the annualized financial return on equity of insurance companies was 2.87%.
The establishment of private securities investment funds reduces profit fluctuations.
In the view of insurance capital insiders, facing the challenge of investment return fluctuations, the establishment of private securities investment funds can reduce the impact of equity asset fluctuations on the net profit of insurance companies, making the performance more reflective of long-term operating results.
"Expand the reform pilot of long-term investment of insurance funds and support other qualified insurance institutions to establish private securities investment funds."
When mentioning the measures for insurance funds to continue to support the continuous and stable development of the capital market, Li Yunze said at the press conference.
The background of this "expansion" is that at the end of last year, the insurance industry saw the first pilot for the establishment of private securities investment funds.
At that time, China Life and New China Life announced a joint investment of 50 billion yuan to establish a private securities investment fund, sparking a wave of discussion in the industry.
Huaxi Securities said in a previous research report that unlike the private equity funds established by insurance companies before, this private securities investment fund is the first private securities fund directly invested in by Chinese insurance companies.
There were also situations where insurance funds were invested in private securities funds before, but they were often "indirectly" realized through investment advisory methods.
Compared with private equity funds mainly investing in non-publicly issued and traded equity in the primary market, private securities funds mainly invest in stocks, bonds, futures, funds, etc.
traded in the secondary market.
New China Life and China Life also publicly responded to the investment direction of this private securities fund.
New China Life said that the establishment of the fund will further increase long-term investment assets that are in line with the company's investment strategy.
China Life said that the fund intends to invest in stocks of high-quality listed companies with good corporate governance and stable operation, and to invest and operate according to market principles, grasp the timing of the position according to the market situation, and dynamically optimize the strategy.
Li Yunze said at the press conference that the fund has officially started investment operations and is currently progressing smoothly.
"We applied for this pilot at the time.
If it expands, we want to continue to strive for this qualification."
The above-mentioned senior executive of the large insurance institution told Yicai reporters, and several other insurance institutions have also shown a strong interest in this.
One of the main reasons why insurance companies are so interested in this private securities investment fund is that the different accounting arrangements for using this form of private fund can alleviate profit fluctuations.
"After the implementation of the new accounting standards, the impact of capital market fluctuations on the profit and loss statement is relatively large.
If done through the form of private securities investment funds, it can relatively weaken this impact and is in line with our long-term investment philosophy."
The above-mentioned senior executive of the large insurance institution said.
According to the views of industry analysts, in the equity structure of the private securities investment fund co-operated by China Life and New China Life, both insurance companies hold 50%, which can be considered to have a significant influence.
Therefore, the investment of both insurance companies in the private fund can be classified as long-term equity investment, and the subsequent measurement can be carried out by the equity method.
In addition, some equity assets can also be designated as FVOCI (financial assets measured at fair value with changes recorded in other comprehensive income) in the private securities investment fund.
These two methods can reduce the impact of short-term fluctuations in equity assets on profits and further increase the enthusiasm of insurance capital to enter the market.
In addition, the consumption of solvency for investment in equity assets is relatively large.
According to Yicai's understanding, in the above pilot, the policy may have a certain inclination towards the relevant solvency risk factors, and it will also have a positive impact on the solvency of the pilot insurance companies.
Fully implement the 3-year long-term assessment and be a firm value investor.
In fact, in recent years, the regulatory authorities have repeatedly promoted medium and long-term capital into the market and have achieved some phased results.
The data shared by Wu Qing, the chairman of the China Securities Regulatory Commission, at the press conference shows that by the end of August this year, the total holding of A-shares by professional institutional investors such as equity mutual funds, insurance funds, and various pension funds was close to 15 trillion yuan, more than doubling from the beginning of 2019, and the proportion of A-shares increased from 17% to 22.2%.
However, he also said that there are still prominent issues in the current capital market, such as insufficient total amount of medium and long-term funds, suboptimal structure, and insufficient leading role.
The institutional environment for "long money for long investment" has not yet been fully formed.
Looking at the data from the National Financial Regulatory Administration, by the end of the second quarter of this year, the combined investment ratio of stocks and securities investment funds of life insurance companies and property insurance companies were 12.48% and 15.31%, respectively, still a certain distance from the regulatory limit.
In the view of insurance capital insiders, the important reason for being cautious about "starting" equity assets is not only the concern about short-term fluctuations affecting profits but also the worry that the investment return rate that is not very good in the short assessment cycle will affect their own KPI.
According to the investigation by the Insurance Asset Management Industry Association, the investment performance assessment cycle of Chinese insurance companies is mainly medium and short-term, and nearly 70% of institutions adopt an annual assessment method.
Therefore, extending the assessment cycle has always been a call from the industry, and the regulatory authorities have also repeatedly mentioned corresponding measures in recent years.
In October last year, the Ministry of Finance issued the "Notice on Guiding Insurance Funds for Long-Term and Stable Investment and Strengthening the Long-Cycle Assessment of State-Owned Commercial Insurance Companies," which clearly adjusted the assessment method of the return on net assets (ROE) of state-owned commercial insurance companies from "annual indicators" to a combination of "3-year cycle indicators + annual indicators."
At this press conference, Wu Qing also said that the "Guiding Opinions on Promoting Medium and Long-Term Capital into the Market" will be issued soon, and one of the key points is to improve the regulatory tolerance for equity investment of medium and long-term funds and fully implement long-cycle assessments of more than 3 years.
Eliminate institutional barriers affecting long-term investment of insurance funds, promote insurance institutions to be firm value investors, and provide stable long-term investment for the capital market.
Under low interest rates, insurance capital is optimistic about the long-term allocation value of A-shares.
For insurance capital, policy dividends will undoubtedly directly benefit the equity investment of insurance capital, and the real strength of the A-share market is undoubtedly naturally attractive to insurance capital.
In fact, although the equity market still showed a low-level shock performance in the first half of the year, the investment heads of large insurance institutions generally believe that in the current low-interest-rate "asset shortage" background, the importance of equity asset allocation is highlighted.
The insurance capital is generally optimistic about the long-term allocation value of A-shares.
"We believe that the overall valuation of A-shares is at a low level in the market and has long-term allocation value," said Liu Hui, vice president and chief investment officer of China Life, at the recent semi-annual performance release.
Deng Bin, chief investment officer of Ping An, also said that the valuations of A-shares and Hong Kong stocks are at relatively low levels, and high-quality, high-dividend, and low-valuation large central state-owned enterprise stocks provide long-term value-added space and good configuration opportunities for insurance capital to enter the market, suitable for long-term holding by insurance capital.
However, insurance asset management heads also frankly said that in the current situation of low-level shock and structural differentiation of the equity market, the difficulty of equity asset investment is also increasing.
It is necessary to adhere to the dumbbell-shaped asset allocation, adopt a balanced configuration style, continue to increase the allocation of dividend value stocks on the one hand, and on the other hand, keep up with the growth sectors related to the new quality productive forces driven by national policies, such as hard-core technology, green energy, artificial intelligence technology industry chain, low-altitude economy, information security, etc., seize the structural opportunities of the A-share market; and carry out counter-trend investment in a timely and appropriate manner, cross-cycle allocation, and actively buy high-quality stocks that have fallen out of cost-effectiveness.当然可以，不过您还没有提供需要翻译的内容。请提供您想要翻译的文本，我会帮您翻译成英文。
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