not vested
Why Is China Life Insurance Soaring? By Shuli Ren
The Hang Seng Composite Index rose 0.6% on Monday, boosted by Chinese insurance companies.
China Life Insurance (2628.Hong Kong) soared 4.7%, the most traded stock on the benchmark index. Ping An Insurance (2318.Hong Kong) came second, up 2.6%. New China Life (1336.Hong Kong) advanced 4.3%, China Taiping Insurance (966.Hong Kong) gained 3.6%.
So why are the Chinese insurance companies soaring and why China Life in particular?
It was because
bond yields in China are seen to be rising, traders say. Last Friday, on the first working day after the long Chinese New Year holiday, the People’s Bank of China raised its 7-, 14- and 28-day repo rates by 10 basis points, to 2.35%, 2.50% and 2.65% respectively, the first reverse repo rate hike since October 2013!
Higher interest rates are seen to be beneficial to insurance companies, and life insurers in particular, because their liabilities have much longer duration.
While some brokerages tried to assure us the PBoC was not tightening its monetary stance, Goldman Sachs is not shy from expressing its view:
On Friday, PBOC increased interest rates on OMOs (open market operations) by 10bp and on SLF (standing lending facility) by 10-35bp—shortly following the rise in interest rates on MLF (medium-term lending facility) less than two weeks ago.
As we noted recently, we believe that the PBOC will retain its tightening bias in the near term as the underlying financial-leverage and macroeconomic arguments for tightened monetary policy have largely remained.
We continue to expect that the PBOC’s tightening bias will remain unless either
i) there is a clearer deleveraging in the interbank funding market, and/or
ii) economic activity slows materially.
Year-to-date, the iShares MSCI China ETF (MCHI) already rose 7.7%.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... e-soaring/
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