Major insurance companies, which have been increasing holdings since mid-August, are still seeking for more investment opportunities. They buy more in growth stocks with better-than-expected performance this week following making more investments in CSI 300 index, CSI 500 index and blue-chip stocks last Monday, according to Shanghai Securities News (SSN).
It is learnt from many investors at insurance institutions that they are more positive and optimistic in investment sentiment when compared with a month earlier. They viewed that the stock market is repeatedly recovering and rebounding now, so they can be more optimistic.
As for the reasons, in terms of domestic market, the market is at the bottom right now. They prefer to find out some high-quality individual stocks which have been undervalued in their interim reports rather than guessing where is the bottom for stock index. “We estimate that a lot of opportunities for value investment will spring up.”
As for overseas environment, the People’s Bank of China (PBOC) has resumed “counter-cyclical factor” for renminbi’s exchange rate, which is expected to stabilize exchange rate and market sentiment as well. Signs show that billions of overseas funds have quietly flooded into A-share market.
Regarding industries, after blue-chip stocks surged and market risk preference rose last week, major insurers invested more in growth stocks this week whose performance beat expectation as they believed more elasticity in these stocks. However, they said that low-valuation bank stocks and insurance stocks are still worth allocation as the proportion of A shares to be included in MSCI index will hike to 5 percent at the end of this month.
Generally speaking, insurance institutions mainly make their investment strategy based on their estimation on current situation. Several accidental events lately caused the market to worry about inflation. Major insurance institutions widely predicted that consumer price index (CPI) will be controllable and downward trend for producer price index (PPI) won’t be changed easily within this year. In addition, they will continue to keep an eye on trade friction.
“CPI growth on a year-on-year basis will fluctuate above 2 percent in the third quarter and will hardly be higher than 3 percent for the whole year. The downward trend for PPI growth will delay due to restriction on iron production, expectation on infrastructure construction, rising oil prices, and inflation. But there’s less stimulus for PPI growth resulting from decreasing domestic demand, rapid growth in inventories of industrial products and higher comparison base of PPI data of the fourth quarter of last year,” said a large insurance institution.
The PBOC unexpectedly injected 149 billion yuan into the market through medium-term lending facility (MLF), improving liquidity. Although short-term interest rate fell remarkably, there’s no prominent recovery in market sentiment as turnover and holdings of national bond futures kept shrinking during the rebound. Moreover, after the bond market surged upon the rumor about MLF injection last Thursday, it dropped again as the capital injection through MLF failed the expectation and bank stocks moved up significantly the next day.
“Rate bond yield plummeted. Interest of long-term bond saw limited decrease and cannot recover the decline of last week in spite of affluent capital supply. Yield of other bonds climbed slightly.” A person engaged in fixed income investment of a large insurance company said that expectation on RMB devaluation becomes weak and exchange rate issue can be hardly the major obstacle in bond market in the short term.
The above person said that food sector under CPI will face certain pressure. But given the slowdown in oil price growth and higher comparison base, the pressure on CPI and PPI will be limited. However, expectation on inflation will rise unavoidably, which will impact the bond market in the short term. Market sentiment will be rather sluggish under rising expectation on inflation and pressure from supply of local government bonds. Investors are suggested to concern transactional opportunity in the short term.
Translatd by Vanessa Chen
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