Today, the insurance sector continued to show strong performance, surging by as much as 2.55% at one point during the trading session, with a cumulative increase of nearly 8.3% over the past two days, demonstrating a robust upward momentum. Subsequently, the upward trend slowed down somewhat, with the sector index increase hovering around 1%.
The A-share insurance sector index has risen for two consecutive days. Among the individual stocks in the sector, Ping An of China led the gains. Its Hong Kong stock has risen for four consecutive days. Calculated based on today’s intraday high, the cumulative increase has reached 8.3%. New China Life Insurance also performed strongly, with its A-share price rising by approximately 7% over the past two days.
Industry Analysis
Industry insiders have analyzed that recently, insurance funds have continued to “sweep up” bank stocks, both A-shares and H-shares, accelerating equity investment, which has become the main driving force for the market to go long on this sector.
Keep “Buying Up” Bank Stocks
Recently, after Ping An of China purchased another 63.534 million shares, its shareholding ratio in the H-shares of Agricultural Bank of China rose to 15.15%. According to the Hong Kong Stock Exchange’s Disclosure Easy, on June 6th, Ping An of China purchased 63.534 million H-shares of Agricultural Bank of China at an average price of HK$5.3126 per share, spending approximately HK$338 million. After this transaction, Ping An of China’s holdings of H-shares of Agricultural Bank of China reached approximately 4.658 billion.
This is only part of Ping An’s “shopping spree.” The disclosed information shows that Ping An Life Insurance holds 3.944 billion shares, and Ping An Property & Casualty Insurance holds approximately 691 million shares. This means that Ping An Life Insurance has been continuously increasing its holdings of Agricultural Bank of China’s H-shares since it reached the 10% takeover mark on May 12. Based on the closing price of Agricultural Bank of China’s H-shares at HK$5.55 on June 11th, the current market value of the H-shares held by Ping An of China in Agricultural Bank of China has reached HK$25.85 billion.
In addition, Ping An of China also holds a large number of H-shares of China Merchants Bank, Postal Savings Bank of China, Industrial and Commercial Bank of China, and China Construction Bank. Xie Yonglin, the general manager and co-CEO of Ping An of China, once stated that major state-owned banks have a solid operational foundation and are characterized by low volatility, high dividends, and low valuations. Their average dividend yield is over 5%, which offers a considerable spread compared to the current 2% to 2.5% guaranteed interest rate of insurance products. In terms of allocation, the company carefully selects targets with stable operations, strong risk resistance, stable dividends, and sufficient safety margins. From this perspective, core bank stocks are relatively ideal investment targets.
Why Are Bank Stocks Favored?
In addition to Ping An of China, New China Life Insurance and Ruizhong Life Insurance have also respectively invested in Hangzhou Bank and CITIC Bank.
In January this year, New China Life Insurance took a stake in Hangzhou Bank, expressing its long-term optimism about the bank’s future development prospects and recognizing the achievements the bank has made in corporate governance, business capabilities, risk management, and operating results. After the completion of this equity change, New China Life Insurance will strengthen its in-depth cooperation with Hangzhou Bank through equity ties, promote the development of banco insurance business between the two sides, and enhance the value of both parties.
Data statistics show that as of May 31, a total of 7 insurance companies have made 15 shareholding acquisitions this year, exceeding the total number of shareholding acquisitions in 2023 and approaching the total number of shareholding acquisitions in 2024.
It is not uncommon for insurance funds to invest in the stocks of listed companies, but only when they reach a certain scale can it be called “taking a stake.” Overall, in the last two rounds of insurance capital’s shareholding waves, bank stocks have been important investment targets. Bank stocks generally have the characteristics of large volume, relatively low valuation, and high dividend yield, and are the preferred type of stocks by large insurance funds. Furthermore, the operating conditions of banks, especially large state-owned banks, are relatively stable, which is highly consistent with the investment philosophy of insurance funds. In addition to the investment demands on the capital side, the prospects of the bank-insurance linkage on the liability side also offer more possibilities for insurance funds to take stakes in banks.
Insight from Industry Insiders
Some insiders have analyzed that continuously favoring bank stocks and increasing the proportion of equity investment is one of the important ways for insurance funds to increase investment returns. Under the circumstances of the successive switching of new accounting standards for non-listed insurance companies and the downward trend of long-term bond interest rates, holding high-quality assets heavily and increasing the scale of long-term equity investment is conducive to promoting more stable returns and financial statements.
Huatai Securities analyzed that the key to taking a stake lies in the fact that the insurance company is optimistic about the development prospects of the invested company and is willing to hold it in a concentrated manner. If it can meet the standards of long-term equity investment, it can enjoy the benefits of stable investment returns even more. At present, insurance funds are still actively entering the market through innovative means such as long-term investment reform pilots. The pilot program for long-term investment reform of insurance funds refers to the establishment of private securities funds by insurance companies, mainly investing in secondary market stocks and holding them for the long term.
Related Topics:
