BOCOM INTL: Regulatory efforts to promote the entry of medium and long-term funds into the market, looking forward to long-term investment.

BOCOM INTL released a research report stating that the convenience of exchange between the central bank and non-bank institutions, stock buybacks, and incremental refinancing will provide strong support for the stock market. The implementation of the "plan" will bring sustainable incremental funds to the A-share market and enhance the inherent stability of the stock market. Long-term funds are the cornerstone of the stable development of the stock market, and the stable development of the stock market will also provide sustainable investment returns for long-term funds. The bank looks forward to long-term investment, promoting a virtuous cycle between long-term funds and the stock market. Event: On January 22, six ministries jointly issued the "Implementation Plan for Promoting the Entry of Medium and Long-term Funds into the Market"; on January 23, the State Council Information Office held a press conference to introduce efforts to promote the entry of medium and long-term funds into the market and promote the high-quality development of the capital market. BOCOM INTL's main points of view are as follows: Key points of the "Implementation Plan": 1) Increase the proportion and stability of A-share investments of commercial insurance funds; 2) Optimize the investment management mechanism of national social security funds and basic pension insurance funds; 3) Improve the market-oriented investment operation level of enterprise pension funds; 4) Increase the scale and proportion of equity funds; 5) Optimize the investment ecology of the capital market. Specific investment ratio requirements are proposed for the entry of medium and long-term funds into the market. 1) For publicly offered funds, it is stipulated that the circulation market value of A shares held by publicly offered funds must increase by at least 10% per year for the next three years; 2) For commercial insurance funds, large state-owned insurance companies strive to use 30% of the new premiums annually from 2025 to invest in A-shares, and strive to continue to steadily increase the proportion of insurance funds investing in the stock market on the existing basis. Currently, the amount of insurance fund investment in stocks and equity funds exceeds 4.4 trillion yuan, with stocks and equity funds accounting for 12% of the investment assets, and the investment in unlisted equity of enterprises accounting for 9%. Long-term incentives are provided through long-term assessments. The "Implementation Plan" proposes that public funds, state-owned commercial insurance companies, basic pension insurance funds, and pension funds must all establish assessments lasting more than three years. For state-owned insurance companies, the weight of the net asset return rate assessment in the current year is not higher than 30%, and the weight of the index in the three to five-year cycle is not less than 60%. The pilot project of long-term stock investment by insurance funds will be further expanded. In November 2023, China Life Insurance and New China Life Insurance, as the first batch of pilot institutions, announced the establishment of a private equity investment fund with a joint investment of 50 billion yuan. The second batch of pilot projects for long-term stock investment by insurance funds will be implemented in the first half of 2025 with a scale of no less than 100 billion yuan, and will gradually expand further; the mechanism will also become more flexible. The convenience of exchange between the central bank and non-bank institutions, stock buybacks, and incremental refinancing will continue to expand, and policy arrangements will be optimized. 1) The convenience of exchange between the central bank and non-bank institutions has been conducted twice, with a total amount of 105 billion yuan: the 500 billion yuan operation in October 2024 has all been used for financing and stock holdings; the 550 billion yuan operation in January 2025 can be used at any time for financing and stock holdings. The scale of securities firms' own stock investments has significantly increased. 2) The policy arrangement for stock buybacks and incremental refinancing has been optimized: the self-owned fund ratio requirement has been reduced from 30% to 10%, the maximum loan term has been extended from 1 year to 3 years, and banks are encouraged to provide credit loans. More than 300 listed companies have publicly disclosed plans to apply for stock buybacks and incremental loans, with a total amount exceeding 60 billion yuan and an average interest rate of around 2%.