At the analysis meeting on the allocation of insurance funds in the second quarter of 2020 held on July 28, insurance capital collectively looked at the market and formed a greater consensus on the equity market trend. This meeting was convened by the China Insurance Asset Management Association's Joint Strategy Committee and Research Committee. More than 40 people participated in the conference. Among them, 20 heads of insurance institutions and investment researchers gave speeches, exchanged ideas and summarized the problems, situation, risks, challenges faced by the research and judgment industry in the first half of the year.

Regarding the equity market trend, many insurers who participated in the meeting mentioned that it is still attractive in the long-term, and the slow bull market is worth looking forward to. Now it is a better allocation window. At the same time, however, market volatility has increased and the market has continued to differentiate.

Duan Guosheng, CEO of Taikang Asset, mentioned that the period of lowest interest rate in the bond market may have passed, and the equity market is not pessimistic. During this period, the stock market is relatively friendly, and some stocks still have investment value.

Yu Yingjie, general manager of the investment management department of PICC Group, said that equity assets still have allocation value. Equity investment is an important way for insurance funds to support the development of the real economy and share economic growth.

Meng Sen, assistant to the general manager of Ping An Life, believes that the stock market remains attractive in the long run. From a foreign perspective, the trend of low interest rates continues to prolong, and major foreign stock markets have higher valuations and there is a risk of overdraft. From a domestic perspective, the stock market is more likely to fluctuate in the short and medium term. In the long run, China has a strong institutional advantage, which is conducive to the medium and long-term trend of the stock market in the future.

Meng Hao, Assistant President and Chief Investment Officer of Fosun Prudential Life Insurance, said that the biggest bright spot in the market in the first half of the year was the relatively substantial increase in the equity market. In addition, China's epidemic prevention and control is relatively good, the economy is the first to recover, and the valuation is lower than that of US stocks, which is also very attractive to foreign capital, and liquidity forms a relatively strong support. The registration system of the Sci-tech Innovation Board and ChiNext has been implemented one after another, and the slow bull market in the domestic capital market is worth looking forward to.

Xu Gang, deputy general manager of Taiping Assets, believes that this year's capital market has two outstanding characteristics. One is the significant decline of the global economy under the impact of the epidemic, and the other is that the internal structure of the stock market is notable. On the whole, there are three tendent judgments on the investment market in the second half of the year: First, it is difficult for the center of interest rates to return to the epidemic period in the short term; second, under the current environment, assets have certain advantages; third, opportunities and challenges coexist.

Gong Lei, general manager of Sino-Italian Assets, said in the second half of the year that the equity market is still in a better configuration window, but the market's volatility may increase in stages.

Meng Sen, assistant general manager of Ping An Life, also mentioned that uncertainty and extreme risks have increased the difficulty of equity investment. This year’s epidemic has not been met in a century, and there is a complete lack of judgment on the future trend. This is a big uncertainty. Another uncertainty is the Sino-US dispute, which is also difficult to predict and analyze.

At the same time, Meng Hao, assistant to the president and chief investment officer of Fosun Prudential Life Insurance, also said that the equity market is constantly diversifying, with high-volatility growth stocks rising sharply, and low-volatility growth stocks at a lower rate. The allocation of insurance companies is mainly concentrated in the large-cap blue chip stocks, which poses a relatively big challenge to the allocation of equity of insurance companies.

As a type of capital with long maturity and large scale, insurance capital focuses on the allocation of large-scale assets. How to allocate various assets? What role will equity assets play in the future?

Duan Guosheng said that the fixed income side maintains a cautious strategy, the equity side is optimistic about the value of A shares, the alternative investment side obtains long-term stable income and actively promotes value investment. Firmly determine that the value of A-shares is highly attractive among global asset classes, and respond positively in style.

Yang Ping believes that in the future, public market stocks and primary equity assets will be the most attractive, followed by commodities, and bonds and currencies may be the last two. Institutions have more and more demand for equity allocation, and the power of institutional investors in the A-share open market is increasing.

Xu Gang said that risks and returns must be balanced in the allocation of major assets. Increase the allocation of high-quality assets, grasp the window of interest rate rebound, and promptly allocate some ultra-long-term local government bonds. In terms of equity investment, adhere to fundamental and corporate value investment, strengthen basic research, and grasp changes in the industry's prosperity.

Meng Sen mentioned that insisting on improving the matching of insurance assets and liabilities, the focus is on assets with long duration, high safety, and stable cash flow, such as long-term interest rate bonds, high-quality blue chip stocks, and high-quality real estate.

Regarding equity investment, Meng Sen believes that strategic allocation and tactical allocation should be optimized and coordinated, so that on the basis of adhering to long-term stable value investment, we must also actively focus on the national industrial policy orientation.

Meng Hao mentioned that in terms of equity, we adhere to the concepts of long-term investment and value investment, and adhere to the selection and investment of high-quality targets with low valuation, high dividends, and high growth, combined with the current direction of the country's industrial structure upgrade.

For the equity investment in the second half of the year, Yuan Ruizheng, special assistant to the general manager of CITIC-Prudential Life Insurance, analyzed: From the perspective of investment opportunities, first, the domestic economic recovery trend is obvious, and future equity investment will continue to focus on infrastructure and optional consumer opportunities; second, The leading concentration effect is deduced from the big white horse leading to the subdivision leading. In terms of risks, first, the economic fundamentals and stock prices deviate greatly, especially in the U.S. stock market; second, the A-share market has a more extreme style segmentation, and the valuation quantile gap of each industry is large, and a mean return process will occur in the future.

Zhang Zhen, the proposed general manager of Huaan Assets, said that it is necessary to be prepared to withstand high fluctuations in the market during special periods, keep positions unchanged, and adjust positions to core technology assets that are less affected by the epidemic. He also mentioned that with the main line of "prosperity" changes, he actively participates in the sci-tech innovation board and the ChiNext to generate excess returns, and flexibly uses risk hedging tools to resist net worth retracements.

Zhang Zhen also emphasized that the volatility of equity assets has increased significantly, and we need to be aware of the "three deviations": first, the deviation of domestic and foreign epidemic prevention and control; second, the deviation of economic fundamentals from the performance of the capital market, which may give birth to asset bubbles; It is the valuation deviation between different industries and different companies that will lead to the "valuation trap". At present, the "high valuation trap" and the "low valuation trap" exist simultaneously.

On July 17, the China Banking and Insurance Regulatory Commission issued a new regulation on the allocation of equity assets in insurance assets, relaxing the upper limit of 30% of equity assets allocated by insurance assets, and the upper limit of equity investment for each insurance institution is between 10%-45% of total assets and linked to solvency.

Since the solvency of large insurance institutions is generally sufficient, they will get the result of an increase in the proportion of equity investment after the new regulations. It is reported that the upper limit of the equity investment ratio of many large insurance institutions will rise from the previous 30% to 35%.

The non-bank financial team of Founder Securities predicts that the appropriate liberalization of the equity asset supervision ratio will probably bring incremental funds with long-term investment attributes to the equity market. According to this new regulation, if it is assumed that listed insurance companies only increase the proportion of equity investment by 5%, equity investment funds can also increase by more than 300 billion yuan.

At the same time, a number of large insurance capital institutions have recently stated on different platforms that the new regulations will increase the flexibility of their allocations, which will help insurance capital to participate more actively in the growth process of the transformation of economic kinetic energy.

However, insurance investors also said that the increase in insurance capital entering the market will not happen overnight. First of all, a process is required. At the same time, insurance institutions must balance the increase in income from increased equity investment with the greater fluctuations in performance caused by the increase in equity investment after the implementation of the new financial instrument accounting standard IFRS9.

Zhou Xianhua, vice president of Anhua Agricultural Insurance, also proposed at the meeting that the equity asset allocation of domestic listed insurance companies has increased significantly compared with history, which is mainly reflected in long-term equity investment. The latest regulatory policies for the allocation of equity assets of insurance companies have a substantial driving effect on the entry of insurance capital into the market, and insurance companies need to weigh their own risks.