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Insurance companies to buy overseas stocks

By Song Hongmei (Chinadaily.com.cn)
Updated: 2007-05-25 14:24

Chinese insurance companies will soon be able to invest in the overseas equities market, China Securities News reported Thursday.

TheChina Insurance Regulatory Commission(CIRC) is finalizing detailed implementation rules governing insurance companies investing overseas under the qualified domestic institutional investors (QDII) program and will soon release the rules, said the report.

The CIRC announced a draft version on measures for overseas investment of insurance capital last December soliciting opinions. According to the report, there won't be much difference in the new rules from its draft measures.

In the draft, the CIRC is extending the spectrum of QDII products to overseas stocks. Insurance companies will be allowed to invest in not only fixed-income or money-market products, but also stocks, stock funds and other equity derivative products in overseas markets.

Insurance companies can invest up to 15 percent of their assets at the end of the previous year overseas. They had total assets of 1.97 trillion yuan (US$253.26 billion) at the end of 2006, up 29 percent from the level a year ago.

Analysts forecast the new rules may direct nearly 300 billion yuan to overseas securities markets and help ease foreign exchange reserve pressures while also cutting excessive liquidity in the domestic property and stock market.

"With the yuan growing in value against the greenback and the soaring A-share market, the limited returns offered by QDII products may lack appeal," said an executive of investment department at an insurance company, which has QDII status. "But in the long run, we should pay attention to the world's major capital markets for they are more mature and have advantages in development stability and diversified equity products."

So far, 11 insurance companies have been granted QDII status and received a combined quota of over US$5 billion. Insurance companies including China Life, PICC Property & Casualty and Taikang Life have purchasedH-SharesofBank of China,Industrial and Commercial Bank of ChinaorChina Merchants Bankby using some of their foreign currency bought from the country's foreign exchange watchdog for QDII trials last year.

The Chinese government launched the offshore investment program last April, marking a major step towards the country opening its capital account by allowing more funds to be invested abroad.

Last week, China started to allow commercial banks to buy overseas equities or structured equity products as proxy for their clients. Previously banks were limited to investing client funds only in fixed-income products overseas.