Investment: Long-term capital to be created

With the expansion in the national social security fund's investment range, more long-term capital will be available in the A-share market, facilitating the development of key industries and aiding China's high-quality economic growth, officials and experts said.

The National Council for Social Security Fund, the managing authority, is stepping up efforts to participate in the non-public offerings of listed companies as a strategic investor. This will inject long-term capital into the market, Wang Zhibin, director of the equity management department of the NCSSF, said in an interview with Xinhua News Agency on Thursday.

According to experts at brokerage firm SDIC Securities, bringing in a strategic investor for non-public offerings of listed companies can be seen as private placement in the primary market. The national social security fund, which is both able and willing to hold a large number of shares of public companies for the longer term, will bring in more capital to facilitate the technology advancement, innovation and market exploration of the companies, they said.

The benchmark Shanghai Composite Index gained 1.38 percent to touch 2954.70 points on Thursday, while the Shenzhen Component Index jumped 2.71 percent to 9441.05 points following the NCSSF announcement. The technology- focused ChiNext in Shenzhen surged 3.85 percent. Photovoltaic companies led the Thursday rally by spiking 9.85 percent on average.

The northbound capital, the value that overseas investors buy into the A-share market via the stock connect program linking the Shanghai, Shenzhen and Hong Kong bourses, reported a net purchase of 13.5 billion yuan ($1.9 billion), the highest daily net purchase in five months.

On Dec 6, the Ministry of Finance and the Ministry of Human Resources and Social Security had released the draft measures for the administration of domestic investments of the national social security fund, which will be open for public opinion till Jan 5.

According to the measures, stocks and equity assets can account for a maximum 40 percent and 30 percent, respectively, in the national social security fund's investment portfolio, said Yang Delong, chief economist of First Seafront Fund. This will give the national security fund, which is a long-term investment by nature, more flexibility, boost confidence of investors and stabilize market performance, he added.

Liu Youhua, a senior researcher from private equity market tracker Simuwang.com, said the national social security fund is more inclined toward investing in companies with stable long-term growth prospects. Therefore, A-share computer, biomedicine and food and beverage companies may benefit more from the new measures, he said.

More investment will be directed to key technologies, industrial and supply chain stability, food and energy security, strategic emerging industries, green and low-carbon transformation and digital economy as the maximum investment ratio of equity assets in the national social security fund will be elevated according to the new measures, said Wang of NCSSF.

By including eligible direct equity investment, industrial funds and venture capital as investment targets, more long-term capital will be created to facilitate scientific and technological innovation as well as the construction of a modern industrial system, he said.

Zhao Jun, head of NCSSF's asset allocation and research department, said that relatively novel products gaining increasing market attention, such as the infrastructure real estate investment trusts, as well as hedging tools such as stock index futures, government bond futures and stock option futures, have also been included.

The enriched portfolio will help diversify the fund's investment and risks, eventually optimizing the fund's overall returns, said Zhao.

According to the Central Financial Work Conference held in October, the capital market should be further invigorated, and this can be achieved with more diversified equity financing and an optimized overall financing structure.

Nie Haijun, director of the NSCCF's legal and compliance department, said the current management regulations of the national social security fund have been in place for more than a decade, and are inadequate to address the needs of the capital market now. The forward-looking institutional design in the new measures will help preserve and increase the value of the fund by advancing the standardized and regulated operation of the capital, he said.

According to market tracker Wind Info, the national social security fund has actively adjusted its investments between Oct 17 and Dec 19, increasing its exposure to A-share companies specializing in computers, telecommunications, semiconductors and equipment manufacturing.