CIRC bars Ever­grande Life from trad­ing in shares

China Daily (Hong Kong) - - BUSINESS - By LI XI­ANG lix­i­ang@chi­

China’s in­surance reg­u­la­tor on Fri­day banned Ever­grande Life In­surance Co from trad­ing in stocks.

The move sug­gests the reg­u­la­tor has in­ten­si­fied scru­tiny of in­sur­ers’ run­away — some have la­beled it in­dis­crim­i­nate and im­pru­dent — buy­ing in the eq­uity mar­ket.

Ever­grande Life is the in­surance arm of Ever­grande Group, China’s big­gest prop­erty de­vel­oper.

Fri­day’s trad­ing ban came after the reg­u­la­tor sent two in­spec­tion teams to Ever­grande Life and Fore­sea Life In­surance Co, the in­surance unit of pri­vate con­glom­er­ate Bao­neng Group, re­spec­tively, to in­ves­ti­gate their re­cent ac­tiv­ity in the stock mar­ket.

The China In­surance Reg­u­la­tory Com­mis­sion said in a state­ment on Fri­day that it has or­dered Ever­grande Life to con­sol­i­date its in­vest­ment busi­ness.

The CIRC said the in­surer does not have a clear as­set al­lo­ca­tion plan and its trad­ing prac­tice in­volves “im­proper use of cap­i­tal”.

Ever­grande Life and Fore­sea Life are at the cen­ter of a row over in­surance com­pa­nies pump­ing big funds into eq­ui­ties at an alarm­ing rate.

Such ag­gres­sive stock-mar­ket in­vest­ments raised reg­u­la­tors’ hack­les. The gen­eral fear is that in­sur­ers may be mak­ing highly lever­aged in­vest­ments us­ing pro­ceeds from sales of risky in­surance prod­ucts.

The two in­sur­ers con­cerned are also in­volved in a hos­tile takeover bid for China Vanke Co, a listed prop­erty de­vel­oper. Their on­go­ing tus­sle started nearly a year ago.

Sep­a­rately on Fri­day, China’s se­cu­ri­ties reg­u­la­tor re­vised a reg­u­la­tion to stream­line the ap­proval process and re­duce the ad­min­is­tra­tive cost of ini­tial public of­fer­ings.

The new rules stip­u­late that IPO as­pi­rants can pro­ceed with their share sale ap­pli­ca­tion if the com­pany’s spon­sors are be­ing in­ves­ti­gated for pos­si­ble il­le­gal ac­tiv­i­ties or rule vi­o­la­tions in un­re­lated cases.

Such spon­sors are re­quired to is­sue a new and com­pre­hen­sive as­sess­ment re­port to jus­tify the con­ti­nu­ity of their IPO ap­pli­ca­tions.

Ap­pli­cants who change their un­der-scru­tiny IPO spon­sors can also pro­ceed with their IPO ap­pli­ca­tion, without hav­ing to restart from scratch, ac­cord­ing to the re­vised reg­u­la­tion.

“The goal is to re­duce the neg­a­tive im­pact on IPO ap­pli­cants when the spon­sor­ing fi­nan­cial in­sti­tu­tions are in­ves­ti­gated for pos­si­ble wrong­do­ings,” Zhang Xiao­jun, a spokesman of the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion, said at a news con­fer­ence in Bei­jing.

More than 700 ap­pli­cant com­pa­nies are wait­ing for reg­u­la­tor ap­proval for their IPO plans. IPO ap­provals tend to be time-con­sum­ing and the out­come of ap­pli­ca­tions is of­ten un­cer­tain.

This has led to con­cerns that com­pa­nies miss mar­ket con­di­tions fa­vor­able for their share sales due to the cur­rent process.

Zhang Xiao­jun, a spokesman of the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion

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