Taiwanese insurance companies will be allowed to invest in Chinese yuan-denominated securities and bonds issued in Hong Kong in response to their demand for more investment options, the Financial Supervisory Commission (FSC) said yesterday.
The commission expects the new measure to enhance domestic insurers’ capital-use efficiency while boosting their investment returns, according to a statement on its Web site.
“Given that insurance companies require wider investment options and more flexibility in their long-term capital use than other financial sectors, [the commission] has considered amending the current investment regulations,” the commission said.
To do so, the commission will need to revise Article 12 of the Regulations Governing Foreign Investments by Insurance Companies (保險業辦理國外投資管理辦法), according to the statement.
Taiwanese insurers have been allowed to invest in stocks and bonds in China since the commission gave the green light in August last year.
The new rules are expected to help insurers, such as Cathay Life Insurance Co (國泰人壽), Shin Kong Life Insurance Co (新光人壽), Fubon Life Insurance Co (富邦人壽), China Life Insurance Co (中國人壽), Nan Shan Life Insurance Co (南山人壽) and Taiwan Life Insurance Co (台灣人壽), to diversify their investment portfolios because they tend to have a lot of idle funds.
Under the new rules, Taiwan’s insurers can invest in Hong Kong-listed, yuan-denominated red chip stocks and H-shares as well as stocks and exchange-traded funds issued by companies listed on the Hang Seng China Enterprises index.
In addition, domestic insurers can also invest in Hong Kong-traded, yuan-denominated Chinese government notes, corporate bonds and bank debentures, as well as the so-called “dim sum” bonds issued by foreign companies traded in Hong Kong.
However, Taiwanese insurers will be restricted from investing more than 10 percent of their FSC-approved foreign investment in those yuan-denominated securities, the commission said.
The commission said it would soon release the amended regulations for public review for seven days and that it would weigh both public and administrative opinion before implementing the new regulations later this month.
Separately, net foreign capital inflows increased by US$466 million last month, the third monthly expansion in a row, to reach US$170.8 billion, the commission said in a separate statement yesterday.
Last month’s net inflows was higher than the US$439 million in May, but far below the US$4.25 billion recorded in April, which was the highest monthly level in a year, the commission’s data showed.
The commission defines foreign capital inflows as those from foreign institutional investors, foreign individual investors, Chinese institutional investors and overseas Taiwanese investors.
Overseas investors reported a net purchase of NT$26.97 billion (US$937.3 million) in Taiwanese shares on the Taiwan Stock Exchange and the GRETAI Securities Market in the first half, as a result of purchases of NT$3.11 trillion and sales of NT$3.08 trillion in shares respectively.
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