Insurance companies bought A shares on the dip for three consecutive trading days
Major insurance companies bought A shares on the dip worth at least several billions of yuan on August 20, according to exclusive news from Shanghai Securities News (SSN).
A staff from a large Chinese insurance firm told the reporter that since Shanghai Composite Index dipped below 2700, the company has made additional investments in CSI 300 index and CSI 500 index worth several billions of yuan in three consecutive trading days.
Several large insurance companies also invested more in A shares. Besides CSI 300 index and CSI 500 index, they also bought financial stocks by putting in several billions of yuan. “We also invest in bank, insurance and securities sectors, which are better target for risk aversion.”
Are they persons of foresight by increasing their positions at this moment? “Absolutely not.” A person from a large insurance company pointed out that “insurance companies look forward to the long-term benefit and the trend. What we see right now is a strategic opportunity for allocation.”
“The logic, if any, is that risk has been fully reflected in stock price after continuous adjustment. Therefore, we may take reverse thinking as well when being panic.” A stock investment manager from an insurance company in Shanghai analyzed that there are more chances than risks in the medium and long term as the market has been at the bottom. The market has entered the strategic allocation region of value investment.
A researcher from a large insurance institution in Beijing also agreed with the above view. “Signs of market reaching the bottom that the number of companies with stock prices lower than their net value reached the highest level and prices of stocks which enjoyed strong performance at early stage began to drop have appeared.” He said that some positive factors are around the corner. Firstly, the upcoming new round of China-US trade talk may ease market sentiment. Secondly, exchange rate of renminbi is likely to stay stable in the short term.
The researcher added that semiannual reports are going to be released and investors can seek the high-quality individual stocks which beat expectation and their value is underestimated. “In addition, infrastructure construction chain face the least resistance. Key attention can be paid to iron and coke sectors which benefit from production restriction for environmental protection and have lower valuation.”
A senior insider who has long focused on equity investment of insurance companies told the reporter that insurance companies usually adhere to some rules to increase their positions. Generally speaking, if the market keeps declining rapidly, insurance institutions will usually increase their holdings out of demand for capital allocation. However, the increasing new insurance premium also adds capitals for insurance companies to make additional investment. This rule is often adopted when other investment channels are less attractive in bond market.
Translated by Vanessa Chen
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