China's securities and insurance regulatory authorities may soon establish companies to take over management of the securities funds of newly listed insurance firms, said industry officials.
China allowed insurance companies to enter the stock market by purchasing securities funds last year.
By the end of June, 20 insurance companies in China had purchased a total of 9.15 billion yuan (US$1.1 billion) in securities funds.
The purchase is 3.45 percent of the companies' total assets, and 0.04 percent of China's total stock market value, said Jin Ying, deputy secretary-general of the industry watchdog China Securities Regulatory Commission (CSRC), at a recent seminar.
However, Jin said most of the insurers invested less money into the stock market than was permitted by regulatory authorities.
"The lack of securities fund varieties and the shortage of direct channels for insurance to access the market have dampened insurers' enthusiasm," Jin said.
China still has no open securities fund which allows investors to withdraw and enter any time they like. The present closed securities funds cannot meet the demand of insurance companies, she said.
Insurance companies unable to directly engage in securities investment and having to leave their money in others' hands also hurt their enthusiasm, Jin said.
In a mature market, insurance companies usually manage insurance funds that have entered the stock market through specialized management institutions or their investment arms, she said.
The CSRC will launch open securities funds as soon as possible on a trial basis, said Jin. "We'll try to make open funds the main stream of our fund market in five years to enrich the investment variety."
The watchdog also plans to explore various ways for insurance companies to enter the securities market including direct entry into the secondary stock market, she said.
The CSRC and the China Insurance Regulatory Commission (CIRC) are jointly applying to the State Council for insurance funds directly entering the market and the set-up of specialized insurance fund management companies, she said.
CIRC Chairman Ma Yongwei said in a recent conference that the development of China's insurance funds should follow two stages.
"At present, insurance companies can purchase the established securities funds which are managed by fund management companies. Later they should be able to set up insurance funds and their own management companies on a trial basis," he said.
Insurance companies should be important institutional investors in China's securities market, Jin said.
(China Daily 10/08/2000)
