By Li Zengxin (chinadaily.com.cn)
Updated: 2007-07-17 16:08

China is to allow insurers to double the share of assets invested in local equities to 10 percent from the current 5-percent cap, said industry executives briefed by the insurance regulator.

The China Insurance Regulatory Commission (CIRC) has told the asset management arms of insurance companies to prepare for buying more domestic stocks, said the industry executives, although the regulator hasn't announced the plan yet.

China Life Insurance Co, Ping An Insurance Co, and rivals can seize on the new rule to boost returns from their US$321 billion of assets as premium growth slows. Insurance companies may use some of the funds to invest in companies traded in Hong Kong which are planning to sell yuan-denominated shares on the mainland.

"This is aimed at increasing the profits of the insurers," said Huang Huamin, a Beijing-based analyst at CITIC Securities Co. "Insurers mostly buy blue-chip shares, so an increase of funds may push up prices of big companies like banks," said Yi Yangfang, who helps manage about US$5 billion at GF Fund Management Co.

The stock market, having more than doubled its total market value in the past year, has brought securities houses hefty profits. By Monday, 22 securities firms released their half-year results, many of which saw their profits grow more than four times. And the brokerage business was the largest profit-generating source.

Shenyin Wanguo Securities had net profit of 2.975 billion yuan ranked on top of the list, followed by Everbright Securities with 2.104 billion yuan of profit and Huatai Securities with 1.734 billion yuan. Income from brokering commissions accounted over three fourth of total operating income for them.

However, looking at the short term, the volatility of stock market has led to a sharp decline in the number of newly opened trading accounts in China, the China Securities Depository and Clearing Co Ltd announced on Monday.

Investors opened 66,100 A-share accounts on Friday, the second consecutive day when the number of new accounts opened daily was below 70,000, according to the company.

It said the A-share accounts opened each day dropped to 99,957 on July 2, the first time lower than 100,000 since May 12, and remained under 100,000 for ten consecutive days. The number was over 300,000 at its peak time.

Analysts said the recent stock volatility has dampened investors' enthusiasm and prompted them to halt their frenzied rush to the stock markets for higher earnings.

The total accounts on both Shanghai and Shenzhen stock exchanges, including A-share, B-share and mutual fund accounts, reached 108 million as of Friday.

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