China has opened up a new channel for insurers to invest in Hong Kong equities.
Insurance funds are now allowed to buy the city’s shares through an exchange trading link with Shanghai, the China Insurance Regulatory Commission said in a statement on its website, without saying when the funds could start using the link. The increased access will help the companies boost investment returns, it said.
The move comes less than a month after officials dropped the overall quota for mainland investors to buy stocks in Hong Kong and approved the opening of a second link via Shenzhen, while retaining daily limits. Insurers are allowed to invest up to 15 percent of their assets in overseas markets including Hong Kong, which they can currently do through a different program.
“It’s unexpected and positive for the Hong Kong market, though there are regulatory caps on how much money they can actually allocate," said Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong.
Chinese investors have already been showing more appetite for Hong Kong stocks. Net buying of equities in the city through the Shanghai link has swelled to average 4.7 billion yuan ($705 million) a day this week, exchange data show. Hong Kong’s Hang Seng Index has rallied 9.2 percent this year, compared with a 13 percent drop for the Shanghai Composite Index.