China Insurers Rise on Fund Management Entry: Shanghai Mover

Chinese insurers rose in Shanghai trading after the nation’s securities watchdog said they would be allowed to set up mutual funds, boosting optimism that the industry would benefit from increased demand.

China Life Insurance Co. (601628), the nation’s largest insurance company, jumped 5.8 percent, the most in more than six months, to 21.40 yuan at the close of trading. New China Life Insurance Co. (601336) surged 10 percent, while Ping An Insurance (Group) Co. gained 3.4 percent. The benchmark Shanghai Composite (SHCOMP) Index added 1.6 percent after manufacturing expanded at a faster pace.

The China Securities Regulatory Commission posted draft rules on its website yesterday allowing insurers’ asset management units and securities brokerages to set up mutual funds, a move the regulator said seeks to “attract various funds into the capital market.” While it could only contribute marginally to profits, the new policy reinforces prospects that insurers may benefit more from a possible market rally as the nation’s economic growth stabilizes, said Guodu Securities Co.

“Insurers have taken massive impairment charges this year after the market fell, therefore their results will improve noticeably if equities reverse declines as expected,” Deng Ting, Guodu’s Beijing-based analyst, said by phone. “In a market rally, any positive news can be played up.”

Citic Securities Co. (600030), China’s biggest listed brokerage, climbed 1.5 percent to 13.36 yuan in Shanghai trading. Everbright Securities Co. rose 3.6 percent.

Economic Recovery

China’s manufacturing unexpectedly expanded at the fastest pace in 19 months in December, boosting optimism that a recovery in the world’s second-biggest economy is gaining traction.

The Shanghai Composite fell 5.2 percent in the first nine months of this year as China’s economic expansion cooled. China Life’s profit slumped 56 percent to 7.4 billion yuan ($1.2 billion) for that period after recording 29 billion yuan in impairment losses to recognize declines in its stock holdings. The equity gauge has rallied 15 percent this month.

A fund management operation could only make a “fairly small” contribution to insurers’ profits since most of the fund management companies’ net income is less than 1 billion yuan, Guodu’s Deng said. The CSRC is seeking public feedback on its new rules, which require insurers and brokerages to have at least 20 billion yuan in assets under management.

To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net

To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net; Andreea Papuc at apapuc1@bloomberg.net

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