Breaking! China's "insurance capital giants" increase holdings in A-shares—a major signal
On the evening of December 5, the National Financial Regulatory Administration issued adjustments to insurance capital investment rules. It appears to be a technical notice, but carries significant importance:
Making it “easy” for insurance funds to enter the A-share market!
This regulatory adjustment document does not beat around the bush. For the first time, it specifically highlights three key sectors: large-cap leading stocks, low-volatility dividend stocks, and tech innovation stocks.
This means the “ballast stone” long needed by the A-shares market is being reinforced once again, and signals that the “floodgates” for insurance funds entering the market are being lowered.
The structure of capital flows in the stock market will quietly change in the future.
Clear Relief for Three Types of Stocks
Zishitang notes: The "Notice on Adjusting the Risk Factors for Certain Business of Insurance Companies" clearly relaxes regulations for three types of stocks.
It mentions: "For insurance companies, if the holding period exceeds three years for CSI 300 Index constituent stocks and CSI Dividend Low Volatility 100 Index constituent stocks, the risk factor is lowered from 0.3 to 0.27. The holding period is determined by the weighted average over the past six years."
Another example: "For insurance companies, if the holding period exceeds two years for ordinary stocks listed on the STAR Market, the risk factor is lowered from 0.4 to 0.36. The holding period is determined by the weighted average over the past four years."
Additionally: "Insurance companies should improve internal controls, precisely measure investment stock holding periods, and continually enhance long-term capital investment management capabilities."
A relevant official from the National Financial Regulatory Administration said: “This notice sets differentiated risk factors for insurance company investments in CSI 300 Index constituent stocks, CSI Dividend Low Volatility 100 Index constituent stocks, and STAR Market stocks, based on holding periods, to cultivate and expand patient capital and support technological innovation.”
The “Long Cash Reservoir” Trump Card
Zishitang found: The regulator’s statement is not generalizing about “equity assets,” but accurately names three categories of A-share stocks.
CSI 300 constituent stocks (large-cap core assets, representing China’s top listed companies)
CSI Dividend Low Volatility constituent stocks (high-dividend, low-volatility, value companies with stable cash flow)
STAR Market constituent stocks (growth companies representing technological innovation)
These three categories have been the target for increased insurance investments in recent years, and are also the assets most in need of "long-term money" to stabilize valuations and improve pricing efficiency in the current market.
More importantly, after the regulator separately reduced the risk factors for these three types of stocks, the capital cost for insurance funds drops significantly, and entry cost for long-term capital has been substantially reduced.
What does this mean?
In the coming years, the true “reservoir of long-term money” in China’s capital market has been named by regulators, institutionally defined, and directionally confirmed.
Simply put, the three main channels in A-shares where insurance long-term funds are most likely to continue flowing have now officially appeared.
How is holding period calculated?
According to answers from relevant officials at the National Financial Regulatory Administration, the calculation method for holding periods of insurance investments in the above targets is as follows:
For example, for ordinary stocks listed on the STAR Market, insurance companies at quarter-end should calculate the holding period of STAR Market stocks according to a first-in, first-out principle, using a weighted average for the past four years (holdings exceeding four years are counted as four years). For holdings over two years, the risk factor of 0.36 applies.
The Q&A also details adjustments to related risk factors as follows:
First: Adjustment of risk factors for related stock investments. The basic factor in Article 26 of the "Solvency Regulatory Rules for Insurance Companies No. 8: Minimum Capital Requirement for Market Risk" remains the same, as does characteristic coefficient K1. For CSI 300 Index constituent stocks and CSI Dividend Low Volatility 100 Index constituent stocks with a holding period over three years, and for ordinary STAR Market stocks held over two years, the characteristic coefficient K2 is adjusted accordingly.
Second: Adjustment to risk factors for export credit insurance and overseas investment insurance businesses. The basic factor referenced in Article 15 and Article 28 of the "Solvency Regulatory Rules for Insurance Companies No. 4: Minimum Capital Requirement for Insurance Risk (Non-life Insurance)" is adjusted, while related characteristic coefficients remain unchanged.
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