A total of 360 billion yuan ($52.5 billion) in pension funds has been freed up at a provincial level to pursue long-term asset growth, clearing the way for the funds to flow into the stock market, Securities Daily reported.
Seven provinces and municipalities including Beijing and Shanghai have started to grant local pension managers more flexibility in investment operation, You Jun, vice minister of Human Resources and Social Securities, said at a work conference on Thursday, according to the newspaper.
"The pension funds will most likely invest in blue-chips with a high dividend payout," Dong Dengxin, finance professor at Wuhan University of Science and Technology, told the media, adding that there should be an initial cap on equity asset of 10 or 15 percent.
In an earlier report, Huatai Securities estimated that provincial-level pension funds will eventually invest about 400 billion yuan in A shares, representing less than 1 percent of the total market value.
The move is a bid to boost yields of pension funds managed at a local level whose investments were limited only to deposits and government bonds.
The move also coincides with the government's decision to ease restrictions on domestic stock index futures trading, signaling lowered market risk.
Commission fees for intra-day position-closing will be lowered to 0.092 percent of the transaction volume from the previous 0.23 percent. According to the China Financial Futures Exchange, margin requirements for non-hedging transactions on Hushen 300 index futures and SSE 50 index futures will be reduced from 40 percent of the contract value to 20 percent.
