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Chinese insurers took advantage of the bank liquidity squeeze to snap up high-yielding non-standard assets and corporate bonds last year, boosting net profits. However, barring a renewed seizing up of liquidity, insurers’ profit growth is likely to be weaker in 2014.
DANWEI – Pollution in China seems worse than ever, but in 2013 the valuations of a number of companies producing equipment for measuring and filtering pollution have steadily risen. In this edition of the Danwei Bulletin, we look back at a smog-filled 2013 and the companies set to profit from the pollution. Also this week, dairy producer Yili posted record quarterly profits, while insurance firm Ping An is branching out into online financing.
DANWEI – In recent months, the unexplained appearance of dead ducks and pigs in rivers and ongoing debate on social media about fine particle (PM2.5) air pollution have been good news for some companies. The penetration rate of water and air purifying machines in China is still comparatively low. Both these markets are becoming very competitive with emerging Chinese competitors steadily gaining market share from more established foreign players, such as Dutch multinational Philips (NYSE:PHG) and Japan’s Sharp (TYO:6753), by developing cheaper models.
The rise of bank wealth management products (WMPs) and shadow financing has dealt insurance a body blow, though some support is being gained from recent policy moves.
Overbuilding and imprudent investments bedevil the outlook for commercial and mixed-use property in some parts of China
China’s national pension fund has invested over Rmb10bn ($1.6bn, £1.0bn, €1.2bn) into the domestic stock market, state media announced. Dai Xianglong, the head of National Social Security Council, a government entity that manages national pension fund, also encouraged local authority pension funds to invest in equities to preserve and increase their value. He added that 90% of around Rmb1,500bn in pension funds managed by the local government were deposited in banks for an average annual return of 2% in the past decade. In addition, pension funds’ deficits in 14 provinces nearly doubled to Rmb67.9bn in 2010, according to official data. Investing pension funds into stocks has sparked a debate among domestic commentators.
For years regulators stood firmly against the emergence of financial conglomerates but now it seems all banks want to run their own insurance, trust, brokerage and fund arms. The attractions are clear but so are the risks.
China Confidential’s recent survey on investor sentiment reveals clear optimism for 2010, with middle class investors planning to continue investments in stock and property markets.
The spread of increasingly sophisticated, innovative and differentiated financial services to the countryside is propelling the economic emergence of rural China.
After a steady performance in 1H, a number of factors augur well for 2H and further into the future.
11 Sep 2014
