news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

Source: Time Weekly Author: Zhao Peng

Source: Tuchong

Insurance funds are “buying up” Hong Kong stocks again.

Recently, the Hong Kong Stock Exchange disclosed that Ruizhong Life Insurance Co., Ltd. (hereinafter referred to as "Ruizhong Life") increased its holdings on August 7.China Duty Free Group(01880.HK) Hong Kong stocks 151,900 shares. After the increase, Ruizhong Life Insurance's holdings in China Duty Free Group increased to 5.82 million shares, and its shareholding ratio increased from 4.87% to 5.00%, reaching the shareholding threshold.

This is the second time that Ruizhong Life Insurance has raised its stake in a Hong Kong-listed company in the past month. According to statistics from the Times Weekly reporter, since the beginning of the year, insurance companies have raised their stakes in listed companies 11 times, a significant increase compared with the past three years. In the second half of the year, insurance companies have raised their stakes more frequently, with Ruizhong Life Insurance and China Pacific Life Insurance Co., Ltd. (hereinafter referred to as "CPIC Life Insurance") raising their stakes twice respectively, and Great Wall Life Insurance Co., Ltd. (hereinafter referred to as "Great Wall Life") raising its stake once.

A non-bank analyst at a securities firm in South China told the Times Weekly reporter that theoretically, the continued decline in market interest rates will stimulate the real economy to a certain extent, but the low interest rate environment puts pressure on insurance fund investment. In order to balance the pressure on the liability side, insurance companies have to increase the proportion of equity investment.

Ruizhong Life Insurance raised the placard twice in half a month

According to the announcement of Ruizhong Life Insurance, based on the closing price of China Duty Free Group's Hong Kong shares of HK$55.45 per share on August 7 and the exchange rate of Hong Kong dollars against RMB at the end of the day, Ruizhong Life Insurance's book balance of China Duty Free Group's Hong Kong shares was RMB 298 million. It is reported that Ruizhong Life Insurance's acquisition of China Duty Free Group involved a capital of HK$8.2871 million. Based on the amount of increase and the number of shares, Ruizhong Life Insurance's average price for increasing its holdings of China Duty Free Group's Hong Kong shares was HK$54.56 per share.

As of the close of August 13, China Duty Free's Hong Kong stocks have fallen by 52.09% in the past year. China Duty Free's Hong Kong stock price has been falling from its highest point of HK$270 per share in January 2023, falling below HK$60 per share in late June this year, and has remained volatile since then. On July 2, China Duty Free's Hong Kong stocks fell to HK$47.7 per share during the trading session, setting a new low since its listing on the Hong Kong stock market. The stock price has fluctuated slightly in the past month.

As of the end of the first quarter of this year, China Tourism Group Co., Ltd. is the controlling shareholder of China Duty Free Group, holding 50.30% of the shares. According to the official website, China Duty Free Group is a large-scale joint-stock enterprise focusing on tourism retail business, with businesses covering duty-free, taxable, and tourism retail complexes.

The Times Weekly reporter found that before raising its stake in China Duty Free Group, Ruizhong Life Insurance had just raised its stake in Hong Kong stocks.Longyuan Power(00916.HK). On July 22, Ruizhong Life Insurance disclosed that it increased its holdings in Longyuan Power by 5.26 million shares at a price of HK$7.45 per share, with a total amount of HK$39.187 million. After the increase, Ruizhong Life Insurance held approximately 166 million shares, with a shareholding ratio of 5%, reaching the threshold for holding a controlling stake.

Ruizhong Life Insurance stated that the holding of Longyuan Power is for the company to buy Hong Kong stocks of listed companies through the secondary market of Shanghai-Hong Kong Stock Connect. The funds come from its own funds and the insurance liability reserves of the universal account and the insurance liability reserves of the dividend account. The holding of Longyuan Power Hong Kong stocks will be included in the equity investment management.

In contrast, Ruizhong Life used all its own funds to buy China Duty Free Group, but also bought through the secondary market of Shanghai-Hong Kong Stock Connect. Regarding Ruizhong Life's increase in China Duty Free Group's holdings from Hong Kong stocks instead of A shares, the Times Weekly reporter called Ruizhong Life and sent an interview letter, but no response was received before press time.

A public fund investment researcher engaged in Hong Kong stock research told the Times Weekly reporter that although many companies are listed on both A-shares and Hong Kong-shares, insurance companies are more willing to hold target companies from Hong Kong stocks. This is mainly because Hong Kong stocks are less valuable than A-shares and more cost-effective. At the same time, the investment cycle of insurance funds is longer, and there is little need to consider short-term redemption pressure. Specifically, due to factors such as the trading system and exchange rate, the transaction cost of buying Hong Kong stocks through the Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect is higher than that of A-shares. However, if we consider that insurance funds have no redemption pressure and hold them for a long enough time, these transaction costs can be ignored.

Insurance funds have taken stakes in 11 companies this year

According to statistics from the Times Weekly reporter, including Ruizhong Life Insurance, insurance companies have raised their stakes 11 times this year. In 2021, 2022 and 2023, insurance funds raised their stakes once, six times and nine times respectively. So far this year, insurance funds have raised their stakes more times than in any of the past three years.

This year, Great Wall Life Insurance has raised its stake the most times, 6 times. The listed companies that Great Wall Life Insurance has raised its stake include:Wuxi Bank（600908.SH）、Chengfa Environment（000885.SZ）、Qingang Shares（03369.HK）、Jiangnan Water（601199.SH）、Ganyue Expressway（600269.SH）、Green power and environmental protection（01330.HK）。

Previously, Great Wall Life Insurance stated that it is committed to conducting in-depth research on safe assets for investment in infrastructure, people's livelihood, and energy, actively deploying listed companies in ports, highways, energy, water, and environmental protection, and taking ESG and new quality productivity as key investment directions.

Times Weekly reporter/graphics

In the second half of this year, from July 22 to August 7, insurance companies raised stakes in Hong Kong-listed companies five times. Specifically, Great Wall Life Insurance raised stakes in Green Power Environmental Protection; Ruizhong Life Insurance raised stakes in China Duty Free Group and Longyuan Power; and Tai Ping Life Insurance increased its stake inHuadian Power International（01071.HK）、Huaneng Power International(00902.HK), which means that the total shareholding ratio of Huadian Power International Holdings Co., Ltd. and Huaneng Power International Holdings Co., Ltd. held by several subsidiaries of China Pacific Insurance (Group) Co., Ltd. has reached the shareholding threshold.

The aforementioned public fund investment research personnel explained to the Times Weekly reporter that when the market volatility is high, the investment enthusiasm of insurance funds for equity assets will be affected. However, with the current market bottoming out and the impact of low interest rates, it is logical for insurance funds to increase their allocation of equity assets.

The Times Weekly reporter also noticed that in addition to companies in the transportation, environmental protection, public utilities, power equipment, and banking sectors that insurance funds have long favored, companies that insurance funds have taken stakes in also include new energy, commercial services, and other "non-mainstream" sectors. Longyuan Power and China Duty Free Group, which Ruizhong Life holds stakes in, belong to the new energy and commercial services sectors, respectively.

The aforementioned non-bank analyst of the securities firm told the Times Weekly reporter that dividend assets, high dividend assets, and assets with high return on net assets have always been the preferred areas for insurance funds. From another perspective, dividend and high dividend stocks have certain attributes of fixed-income assets to a certain extent. Against the backdrop of a downward trend in fixed-income assets, especially long-term interest-bearing bonds, insurance funds allocate this type of asset mainly to offset the pressure caused by the downward trend in fixed-income returns.

A private equity investment researcher told the Times Weekly reporter that, judging from the companies that insurance funds have taken stakes in, some insurance companies are beginning to take asset growth into consideration while pursuing dividends and low volatility. In addition, against the backdrop of falling interest rates, companies whose dividends were not very attractive will also be gradually accepted.