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With A-shares at a relatively low level, insurance funds are becoming more and more active.

Recently, China Pacific Insurance Group Co., Ltd. (hereinafter referred to as "China Pacific") announced that it would take stakes in two H-share companies.

Taibao announced that due to the purchase of H shares of Huadian Power International and Huaneng International by China Taiping’s holding subsidiaries on July 30, 2024,In addition, China Taiping Insurance and some of its holding subsidiaries together hold 5% of the H-share capital of China Huadian Corporation and Huaneng International, triggering the takeover of the two companies.

This is at least the eighth and ninth listed company that insurance funds have taken stakes in since the beginning of this year, indicating that insurance funds are becoming increasingly keen on bottom-fishing assets of mainland listed companies.

Channel: Buy through Hong Kong Stock Connect

According to the China Insurance Industry Information Disclosure System, China Taiping Insurance recently purchased H-shares of China Huadian Corporation and Huaneng International Power Co., Ltd. through its holding subsidiary through the Hong Kong Stock Connect on July 30, 2024.

Due to the operations on the above-mentioned trading day, China Taiping Insurance triggered the shareholding line (shareholding ratio of more than 5%).

It is worth noting that the relevant announcement revealed two buying characteristics:

1. Buy through Hong Kong Stock Connect (without using QDII quota);

2. All shares purchased are H shares.

Target: Electricity stocks

Announcement information: China Taiping Insurance purchased the H shares of China Huadian Corporation and Huaneng Power International on the same trading day (July 30).

The H-share trend on that day showed that the relevant stocks were in a downward trend, and TaiPing Insurance was buying on dips.

Taibao’s targets this time are all power generation companies, or more precisely, thermal power generation companies with low valuations and high dividends.

According to Tongdaxin's statistics, the latest price-to-earnings ratio of Huadian Power International's H shares is 8.08 times, while the latest price-to-earnings ratio of Huaneng Power International's H shares is only 6.75 times.

Funding: Two channels

This announcement also disclosed a key piece of information: the funds for this H-share stake acquisition came from two sources.

First, China Taiping’s own funds.

Second, insurance liability reserves.

Among them, the account product of insurance liability reserves is the core source of funds for the two power companies being staked.

China Pacific Insurance, which raised the placard this time, is one of the top insurance groups in China. As of the end of the first quarter of 2024, China Pacific Insurance's total assets reached 2.44 trillion yuan, and its net assets were about 276.271 billion yuan. At the end of 2023, the insurance company's comprehensive solvency adequacy ratio was 257%.

During the same period, the book balance of China Taiping’s equity assets was 13.256 billion yuan, accounting for 9.15% of the company’s total assets during the same period.

Peers: They are also rushing to buy similar stocks

In fact, China Pacific Insurance’s peers (other insurance institutions) are also actively buying similar undervalued, high-dividend stocks.

Less than ten days before Taibao raised its stake, Ping An had just raised its stake in Industrial and Commercial Bank of China's H shares, raising its stake in H shares to more than 15%.The latest P/E ratio (TTM) of ICBC H shares is only 4.04 times。

Earlier, Ruizhong Life Insurance raised its stake in Longyuan Power H shares, Great Wall Life Insurance raised its stake in Ganyu Expressway, Wuxi Bank, Chengfa Environment, and Jiangnan Water; and Zijin Property & Casualty Insurance raised its stake in Huaguang Environmental Energy.

Overall, utilities (power generation, water), financials and highway stocks are the most popular.

Among individual stocks of the same company, H shares are more popular than A shares.

All signs indicate that insurance funds may indeed be more focused on equity assets with high dividends.