HONG KONG: Chinese stocks rose on Thursday, supported by the financial sector after Beijing unveiled plans to encourage insurance companies to purchase shares listed on the mainland.
The blue-chip CSI300 index was up 0.6% and the Shanghai Composite Index climbed 1% higher by midday break, both recovering from a nearly 1% tumble in the previous session.
Insurance firms and broader financial sector outperformed with gains of 3.6% and 2.1%, respectively.
China announced further measures on Wednesday to bolster its flagging stock market.
Under the plan jointly released by six financial regulators including the securities regulator, big state-owned insurance companies will be directed to raise both the size and proportion of their investments in Chinese A-shares traded on the mainland and equity funds.
Wu Qing, head of the China Securities Regulatory Commission (CSRC), said during a press conference on Thursday that the plan will bring on at least hundreds of billions of yuan of new capital every year from state-owned insurers.
China and HK stocks tumble on Trump’s tariff threats
The plan also involves guiding mutual fund managers to increase equity funds under their management. The markets reacted positively, but remained cautious about US tariff risks and the outlook for domestic economic growth.
“From an equity perspective, funds could end up increasing positions towards less volatile, larger domestic companies,” said Kai Wang, Asia equity market strategist at Morningstar, referring to high dividend stocks or large-cap companies such as Moutai.
The measures also boosted sentiment in Hong Kong, with the Hang Seng Index and the Hang Seng China Enterprises Index rising 0.2% and 0.5%, respectively.
“The implication (on market) could be short-lived … Most of the investors are still quite cautious at this point,” said Gary Ng, senior economist at Natixis. China will also encourage listed companies to increase share buybacks and distribute cash dividends to investors multiple times a year, according to the plan.
Investors’ preference for safe-haven assets like government bonds is unlikely to be fully reverted with the latest policy, Ng said.
Chinese stocks have dropped 4% so far this year as investors fret over the possibility of US President Donald Trump imposing hefty tariffs on Chinese goods, adding further pressure on an already sluggish economy.
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