Date
23 July 2017
An investor looks up in front of an electronic board showing stock information. Beijing has lifted a ban on stock investment by local governments and pensions funds. Photo: Reuters
An investor looks up in front of an electronic board showing stock information. Beijing has lifted a ban on stock investment by local governments and pensions funds. Photo: Reuters

China allows pension funds to invest in stocks for first time

Local governments have received Beijng’s approval to invest in stocks for the first time, freeing up hundreds of billions of yuan into the China’s struggling equity market.

China announced the move after a public consultation launched on June 30 at the height of a stock market rout.

Despite a series of official measures aimed at supporting the market, investor sentiment has remained fragile amid continued signs of slowing economy.

The State Council published the new rules on Sunday after shares slumped nearly 12 percent last week, the worst weekly performance since June, accordimg to Reuters.

Pension funds can invest up to 30 percent of their net assets in the country’s stocks, equity funds and balanced funds, according to rules published on the State Council website.

Previously, the pension funds could only invest in bank deposits and treasuries.

Together the funds have assets of more than 2 trillion yuan (US$322 billion) that can be invested, meaning about 600 billion yuan (US$97 billion) could theoretically go into the stock market, state media has estimated.

According to the new rules, pension funds can also invest in convertible bonds, money market instruments, asset-backed securities, index futures and bond futures in China, as well as the country’s major infrastructure projects.

Local governments can mandate institutions authorised by the central government to manage the pension funds.

– Contact us at english@hkej.com

CG/RA

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