China Guides Mutual Funds, Insurers to Boost A-Share Market

China's financial regulators have recently issued a plan to encourage mutual funds and insurance companies to increase their investments in the A-share market, aiming to stabilize the market and attract more long-term capital. The plan, released by the Central Financial Commission and the China Securities Regulatory Commission, focuses on optimizing assessment systems for state-owned insurance companies and the national social security fund to promote their investment in the A-share market.

The new assessment systems for state-owned insurance companies and the national social security fund will emphasize long-term performance, with a cycle of more than three years. This shift in assessment criteria encourages these institutions to adopt a longer-term investment horizon, focusing more on the stability and growth of their investments rather than short-term gains. By doing so, insurance companies may be more inclined to invest in blue-chip stocks and high-tech companies, which typically have higher long-term growth potential but may experience short-term volatility.

The plan also entails steadily increasing the stock asset investment proportion of the national social security fund and further expanding the entrusted investment scale of the basic pension fund in eligible regions. Specific long-term performance assessment mechanisms that span over five years for the national social security fund and over three years for the basic pension fund will be clarified, supporting the National Council for Social Security Fund in leveraging its professional investment expertise.

Moreover, efforts will be made to introduce a guideline for over three-year performance assessments of enterprise annuity funds and expand the coverage of enterprise annuities. Listed companies will be encouraged to intensify share buybacks and implement multiple dividend payouts within a year. These measures are focused on guiding commercial insurers, the national social security fund, the basic pension fund, enterprise annuity funds, mutual funds, and other long-term capital to further increase their presence in the stock market.

In conclusion, the new assessment systems for state-owned insurance companies and the national social security fund are designed to promote a longer-term investment approach, which can lead to more stable and potentially higher returns for these institutions. This, in turn, can contribute to the overall performance and stability of the A-share market. As mutual funds and insurance companies increase their investments in the A-share market, the liquidity and depth of the market are expected to improve, ultimately benefiting both listed companies and investors.