China Boosts Stock Market with New Investment Rules

China's financial regulators have introduced a series of measures to encourage big state-owned funds and insurers to buy more stocks. The aim is to support a struggling stock market. On Thursday, the chairman of the China Securities Regulatory Commission, Wu Qing, announced that large insurance companies should increase their stock investments. This includes setting aside 30% of new premiums for stock purchases. A pilot program starting this year will invest at least 100 billion yuan ($13. 75 billion) in long-term stock investments. This is expected to grow to "hundreds of billions of yuan" annually. Mutual funds must also boost their holdings in mainland-listed shares by 10% each year for the next three years. Experts believe these moves will stabilize the market and provide better long-term investment options.

After the announcement, the benchmark CSI 300 index climbed over 1. 8%, reducing this year's drop to about 2. 7%. The index gained 15% last year but fell nearly 12% from its peak. Previous stimulus plans have not revived the economy, leading investors to buy government bonds instead. In October, China's central bank made it easier for insurers to buy stocks with cheaper central bank bills. Chinese companies also paid record dividends and did share buybacks last year. The dividend yield of the CSI 300 is 3%, higher than the 10-year treasury bond yield of 1. 671%. Experts expect the new rules to attract money to undervalued "value stocks" with growth potential. Currently, 12% of insurers' assets are in stocks and equity funds, worth over 4. 4 trillion yuan. Most insurers' assets (50%) are in bonds and deposits. The goal is to reduce the negative impact on household consumption.

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