China Regulator to Step Up Curbs on Insurers’ Stock Speculation

  • CIRC urges insurers to be “friendly investors” in market
  • Regulator to lower single shareholder’s stake cap in insurers

China’s top insurance official followed the nation’s securities authority in denouncing insurers’ leveraged buying spree in listed firms, pledging to step up scrutiny of stock-trading activities by the most aggressive acquirers.

The China Insurance Regulatory Commission Chairman Xiang Junbo questioned the recent aggressive investments by insurers, ranging from buying sizable stakes in listed companies to speculating in stocks with dramatic swings, according to a statement on the regulator’s website that was based on an internal speech by Xiang. Insurance institutions should act as “friendly investors” in an asset market, and “should by no means become barbarians questioned by others,” Xiang was quoted as saying.

The insurance regulator’s comments came days after China Securities Regulatory Commission Chairman Liu Shiyu resorted to unusually harsh language to criticize leveraged acquisitions of shares in listed companies, calling such acquirers “robbers.” Since 2014, Chinese insurers have stepped up acquisitions as their premium income has expanded. Foresea Life, a unit of Baoneng Group, and China Evergrande Group have been battling for control at developer China Vanke Co., the most high-profile target of insurers’ buying spree.

“Insurers have to be providers of long-term funds, not short-term speculators,” he said. They shouldn’t be “hostile acquirers seeking control of firms,” said Xiang, who compared the regulator’s resolution to curb such risks as “taking a knife to one’s own flesh.”

New Rules

The CIRC, which plans to roll out new rules soon, will reduce the proportion of insurance funds allowed to invest in stocks. It will intervene if insurers make frequent share purchases, CCTV said in a Weibo post, citing an interview with the regulator’s Vice Chairman Chen Wenhui.

The regulator will also seek to further cut how much a single shareholder can own in an insurer, as it steps up supervision on insurers’ shareholding structure, according to the speech.

CSG Holdings Co., a glass maker most-owned by Baoneng’s Foresea Life Insurance Co., fell as much as 4.2 percent to 11-month low in Shenzhen, and traded 1.8 percent lower as of 11:47 a.m. The benchmark Shanghai Composite Index rose 0.1 percent.

— With assistance by Emma Dong

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