Illegal stock investments by insurance firms hurt market order: analysts
The Chinese government is beefing up its efforts to crack down on illegal operations in the financial markets, vowing to severely punish financial predators, with the latest focus being placed on speculative investment by insurance companies.
The country's market regulators have stepped up their rhetoric against market wrongdoings, issuing stark warnings to illegal forces in the market. Experts said the warnings show regulators' determination on cracking down on financial crimes, but that more needs to be done.
Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), said during a press conference on Sunday that the government will settle accounts with any "capital predators" who hurt the interests of medium -and small-investors in China.
"I hope our fund institutions won't turn into 'barbarians,' 'demons' and 'evil creatures'...We will watch closely to all the clues, no matter now or in the past, of illegal operations" Liu said, though he refused to clarify who he was specifically referring to.
In recent months Liu has repeatedly stressed that the government is dealing with misdeeds in the domestic financial markets. On January 5, Liu said that China will severely punish capital magnates who challenge the foundation of the law and catch "both the mice as well as the wolves."
Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, said on Monday that the predators in Hong Kong market, if they do exist, will be caught.
Insurance crossover
Xi Junyang, a finance professor at the Shanghai University of Finance and Economics, said that the officials are directly referencing a number of insurance companies that are crossing over to the financial markets by purchasing listed companies, causing fluctuations in the stock markets.
Since the second half of 2016, capital from insurance companies has been pouring into the domestic stock markets, such as Anbang Insurance Group's purchase of China State Construction shares in November.
On February 24, the China Insurance Regulatory Commission (CIRC) fined Foresea Life Insurance and disqualifying the company's chairman Yao Zhenhua from the insurance industry for 10 years.
Foresea Life Insurance holds 6.7 percent of the shares in China Vanke. The company also became the third largest shareholder of Gree Electric Appliances Inc in November 2016.
On February 25, CIRC forbade Evergrande Life from engaging in stock investments for one year.
"The government should put a brake on the stock investment of those insurance companies, as they have disrupted the market order and shouldn't take chances with money collected from ordinary insurance buyers," Xi told the Global Times on Wednesday.
Xiang Junbo, chairman of CIRC, said during a press conference on February 22 that financial predators can't be allowed to make speculative investments via the insurance sector.
Management not strict enough
The government's tougher management is not restricted to insurance companies. Statistics from the CSRC showed that it issued fines worth 4.28 billion yuan ($622 million) in 2016, up 288 percent from the previous year.
Liu Shengjun, a financial economist from the China Europe International Business School, said that CIRC used to turn a blind eye to illegal action on the stock markets, and that's why when they are starting to take action the management seems to be violent.
"I think the CIRC's actions in recent months show the right direction, as the No.1 mission of the CIRC is management, instead of evaluation," he told the Global Times on Wednesday, adding that illegal operation in the financial markets, whether by major predators or small institutions, should all be punished.
He also said that CIRC's management should be even stricter, as many illegal companies are still uncaught.
Xi said that the current financial management law is not mature enough and can't deal with all of the negative factors in the market, while Liu said that the punishment is still too lenient.
The domestic stock markets slumped strongly in January 2016, but have since picked up steadily. Prior to that, the country's markets slid dramatically around June 2015.
