When it comes to bolstering its stock market, Beijing is persistent.The latest effort is a thinly veiled appeal to insurance companies for help. The China Insurance Regulatory Commission has asked firms to stop selling equities and start buying. Publicly, the regulator said insurers must "maintain a long-term and value-investment approach."
The Shanghai stock market -- down 70% in the past year -- has done enough damage to discourage insurers from piling in. China Life's investment portfolio lost $35 million in value in the third quarter. Ping An Insurance saw quarterly investment income drop 81% on a year-to-year basis.
Analysts estimate insurance firms' equity weightings are now under 10% of invested assets.
So, in theory, there is room for them to buy. But a cautious buildup in equity investing may be the best the regulator can hope for.
CIRC's statement Wednesday is probably aimed at encouraging other investors as well. But China's recent macroeconomic data isn't encouraging, and corporate profits look set to decline.
The good news is that the government is taking more concrete steps that should eventually work their way into prices, such as Wednesday's interest-rate cut.
But both insurers and investors will need to see those steps take hold before they take note of rhetoric from regulators.
