China’s new rules to add one trillion yuan into market: analysts

ANALYSTS see China’s latest initiatives injecting at least one trillion yuan (S$186 billion) of additional flows in 2025 into its ailing stock market, with the most bullish calculation by JPMorgan Chase totalling 13 trillion yuan over three years.

Additional buying by insurance and mutual funds this year should be around 1.3 trillion yuan, according to a forecast by JPMorgan. The bank said that while this is only around 1.7 per cent of the total traded market capitalisation, flows in three years could reach between four and 13 trillion yuan. JPMorgan did not provide a breakdown of its calculations.

The figures are based on new rules from China’s financial authorities stipulating that major state-owned insurers need to invest 30 per cent of their new premiums annually from 2025 into onshore stocks while mutual funds should raise their holdings by at least 10 per cent annually for the next three years.

Chinese equities have been under pressure in recent months amid fears over a prolonged economic slowdown and the threat of higher tariffs by new US President Donald Trump. The MSCI China Index briefly entered a bear market this month as investors monitored for more consistent evidence that the policies are taking effect.

Estimates by other banks point to an injection of at least one trillion yuan this year, stemming from the guidelines. Analysts at Citigroup see a total of around 620 billion yuan in buying from mutual funds and put the estimate for insurers at between 200 and 630 billion yuan. UBS Group predicts the influx of funds to reach one trillion yuan from insurers, whereas mutual funds are seen to increase holdings by 590 billion yuan.

On Wednesday (Jan 22), China rolled out a basket of measures to stabilise its stock markets, including plans to boost the amount pension funds can invest in the nation’s listed companies. Traders have grown increasingly disappointed at Beijing’s recent stimulus efforts and have questioned the potency of the measures introduced so far. BLOOMBERG

Share with us your feedback on BT's products and services