Chinese Insurers Rise on New Channel to Invest in Hong Kong

(Bloomberg) -- Chinese insurers rose in Hong Kong as the government’s decision to allow them to invest in the city’s stocks through an exchange link prompted optimism investment returns will benefit.

China Life Insurance Co. jumped as much as 5.6 percent to HK$21.70 in Hong Kong trading, the biggest intraday increase since April 14, while China Taiping Insurance Holdings Co. rose 3.8 percent. The benchmark Hang Seng Index gained 0.9 percent.

While insurers have already been investing in Hong Kong stocks through other channels, the exchange link with Shanghai may make it easier for them to boost holdings of stocks with low valuations and high dividends, according to Huatai Securities Co. Chinese investors’ net buying of equities in the city through the link has swelled to an average 4.7 billion yuan ($705 million) a day this week, exchange data show. The Hang Seng Index has rallied 10 percent this year, compared with a 12 percent drop for the Shanghai Composite Index.

Chinese insurers’ combined profits slumped 54.1 percent in the first half of the year, largely due to stock market declines and higher expenses, the regulator said in July. They are allowed to invest as much as 15 percent of their assets in overseas markets including Hong Kong.

The move, announced Thursday by the China Insurance Regulatory Commission, comes less than a month after officials dropped the overall quota for mainland investors to buy stocks in Hong Kong and approved the opening of a second link via Shenzhen, while retaining daily limits.

To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net. To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Peter Vercoe

With assistance from Zhang Dingmin