Mar­ket drops most in 6 months:

Con­cerns rise over lim­its on in­sur­ers’ stock in­vest­ments

China Daily (Hong Kong) - - FRONT PAGE - LONG WEI / FOR CHINA DAILY

The main­land stock mar­ket plunge on Mon­day was the largest in half a year and was blamed on last week’s clampdown on ag­gres­sive stock pur­chases by in­sur­ers.

Chi­nese main­land stocks fell the most in six months on Mon­day as the in­sur­ance reg­u­la­tor’s clampdown last week on ag­gres­sive stock pur­chases by in­sur­ers trig­gered sell­ing.

Blue chips — in­sur­ers’ fa­vorites — led the de­cline in the bench­mark Shang­hai Com­pos­ite In­dex, which tum­bled 2.47 per­cent to 3,152.97 points.

The Shen­zhen Com­po­nent In­dex fell 4.51 per­cent while the startup board ChiNext suf­fered an even big­ger loss of 5.5 per­cent.

Nearly 200 stocks tum­bled by the 10 per­cent daily trad­ing limit. In­surer fa­vorites such as prop­erty de­vel­oper China Vanke Co, home ap­pli­ance maker Gree Elec­tric Ap­pli­ances Inc and con­struc­tion group China State Con­struc­tion En­gi­neer­ing Corp all fell more than 6 per­cent.

Mon­day’s sell­ing came after the in­sur­ance reg­u­la­tor on Fri­day banned Ever­grande Life In­sur­ance Co from trad­ing in stocks for its “im­proper use of cap­i­tal” and “un­clear as­set al­lo­ca­tion plan”.

Fore­sea Life said in a state­ment on Fri­day it would grad­u­ally re­duce its hold­ing in Shen­zhen-listed home­ap­pli­ance maker Gree.

The move came after the top se­cu­ri­ties reg­u­la­tor cen- sured in­sur­ers’ reck­less stock mar­ket play for “bar­baric” ac­qui­si­tions that chal­lenged the coun­try’s fi­nan­cial and le­gal sys­tem.

“The reg­u­la­tors’ harsh crit­i­cism and tighter con­trol of in­sur­ers’ stock in­vest­ments have had a marked ef­fect on the mar­ket, which will in­evitably en­ter a pe­riod of con­sol­i­da­tion,” said Sun Zheng, an an­a­lyst at China De­vel­op­ment Bank Se­cu­ri­ties Co Ltd.

Gao Ting, the chief China strate­gist at UBS Se­cu­ri­ties, said that the in­sur­ance reg­u­la­tor may be fo­cus­ing more on com­pli­ance with pro­tec­tion prod­uct de­vel­op­ment man­age­ment and usage of in­surer funds, and less on in­sur­ers’ com­pli­ant and law­ful equity in­vest­ments.

An­a­lysts said Mon­day’s plunge also re­flected that the mar­ket sen­ti­ment may be wors­en­ing as prospects for a US rate hike this week brighten.

Also, the higher-than-ex­pected do­mes­tic in­fla­tion in Novem­ber could push the cen­tral bank into adopt­ing a tighter mone­tary stance in 2017, they said.

While Chi­nese equities have ne­go­ti­ated 2016 with­out much tur­moil on the back of the coun­try’s sup­ply-side re­forms and credit risk con­tain­ment, things could turn tougher for in­vestors in the new year, said Wendy Liu, the chief China strate­gist at No­mura Se­cu­ri­ties.

“Bei­jing has put in con­certed mea­sures to curb ex­cesses in the prop­erty and fi­nan­cial mar­kets, as well as cap­i­tal out­flows,” Liu said.


In­vestors check share prices at a bro­ker­age in Nan­jing, Jiangsu province, on Mon­day.

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