China Regulator Restricts Evergrande Life's Stock Investments

  • Two company executives barred from industry for up to 5 years
  • Insurer criticized for investment violation, short-term trades

China’s insurance regulator banned Evergrande Life Insurance Co. from stock investments for one year, stepping up its crackdown on the industry’s most “radical” investors in a bid to rein in risks.

The China Insurance Regulatory Commission also lowered Evergrande Life’s ceiling on equity holdings to 20 percent of assets, from a 30 percent requirement, and barred two executives from the insurance industry for as long as five years, the watchdog said in statements on Saturday. The company violated investment rules, and its short-term trading in some stocks last year had a “vicious social impact,” the regulator said, without elaborating.

Evergrande Life will “decisively” implement the regulator’s decision and stick to “long-term investment, value investment and prudent investment” principles, the company said in a statement on its website after the CIRC announcement.

The company, which was bought and renamed a little more than a year ago by billionaire Hui Ka Yan’s China Evergrande Group, joins Foresea Life Insurance Co. in receiving harsh penalties after CIRC Chairman Xiang Junbo vowed to harness “radical investments” by some insurers and drive out anyone who “challenges the regulatory bottom line.” The regulator on Friday said it had removed Foresea Life’s Chairman Yao Zhenhua from his post and will ban him from the industry for 10 years.

Evergrande Life held shares for an average of just 73 days in its 2,480 stock investments in the first 11 months of last year, according to the statements. The insurer in November said it would “voluntarily” lock up shares of five Shenzhen-listed companies for six months, after the regulator urged it to stop speculation in the market. The insurer, based in the southwestern city of Chongqing, was in December temporarily suspended from new stock investments.

Both Evergrande and Foresea Life had been involved in a widely-watched tussle of control for homebuilder China Vanke Co. Evergrande said last month it had “no intention” of increasing its stake in Vanke, after Shenzhen Metro Group Co. struck a deal to become the developer’s second-biggest shareholder.