Insurers to remain cautious over investment: analysts

Despite the loosening of regulatory controls on the proportion of assets that insurers can invest in equities and securities, the sluggish stock market will put off insurers from increasing their investment, analysts said Thursday.

Chinese insurers are now allowed to invest up to 30 percent of their total assets in stocks and private equity, up from 25 percent, according to new rules released late on Wednesday by the China Insurance Regulatory Commission (CIRC).

Insurance companies in China had total assets of 8.29 trillion yuan ($1.36 trillion) by the end of 2013, according to data from the CIRC.

The amount of funds invested by the insurers totaled 7.69 trillion yuan in 2013, of which 29.45 percent was invested in bank deposits, 43.42 percent in bonds, and 10.23 percent in stocks and securities.

The new rules could potentially bring extra funds of about 400 billion yuan into the A-share market, which would be a boost for the overall market performance, Cao Xuefeng, an analyst at Huarong Securities, wrote in a research report published on Thursday.

But whether such a large a mount will really be injected into the market remains unknown, Cao noted.

The Shanghai Composite Index edged up to 2,177.98 in morning trading on Thursday, up 1.7 percent from Wednesday, though the exchange closed slightly down.

"Though the insurers can now increase their investment in the equities market, they will remain cautious and are likely to stick to their current holdings of 10 percent of their assets in the A-share market," Sun Peng, an insurance analyst at BOCI Group, told the Global Times on Thursday.

There is also a possibility that insurers could cut their holdings of stocks because of greater risks, following the overall poor performance of the A-share market in 2013, Sun said.

The Shanghai Composite Index fell by 7.6 percent at the end of December from a year earlier, and the Shenzhen Component Index had plunged by 12.3 percent.

The new rules are part of the move toward more market-oriented supervision by the regulator and give insurance companies more freedom to allocate assets for investment, he noted.

However, insurance companies tend to prefer relatively low-risk bonds in infrastructure projects and commercial properties rather than the stock market, Sun said.