GLMS SEC Securities: Pilot reforms of long-term investment of insurance funds continue to expand, and the capital market is expected to remain stable and improve.

GLMS SEC Securities released a research report stating that the insurance industry is rated as "stronger than the overall market". Regulatory measures such as expanding the pilot scope of long-term investment reform for insurance funds, optimizing solvency regulation rules, and promoting improvements to the long-term assessment mechanism for insurance companies aim to facilitate the entry of insurance funds into the market. This could create further opportunities for the allocation of equity assets by insurance funds, potentially bringing a large amount of long-term capital into the capital market. In this context, the equity market is expected to gradually rebound, and the insurance sector, which is pro-cyclical, is expected to benefit significantly. Recommended stocks include China Pacific Insurance, Ping An Insurance, The People's Insurance, PICC P&C, China Life Insurance, and New China Life Insurance. The main points of GLMS SEC Securities are as follows: Event On May 22, 2025, Guo Wuping, the spokesperson for the China Banking and Insurance Regulatory Commission and Director of the Policy Research Department, announced at a press conference that the initial scale of the pilot project for long-term investment reform of insurance funds was 500 billion yuan, the second batch was 1.12 trillion yuan, and the most recent approval was for a third batch of 600 billion yuan, with a total scale of 2.22 trillion yuan. Expansion of the pilot scope for long-term investment reform of insurance funds On May 7, 2025, Li Yunze, the Director of the China Banking and Insurance Regulatory Commission, announced at a press conference that they would further expand the pilot scope for long-term investment of insurance funds, with plans to approve an additional 600 billion yuan in the near future to inject more incremental funds into the market. Guo Wuping announced on May 22, 2025, that they would also approve a third batch of 600 billion yuan. As an important tool to promote the entry of insurance funds into the market, the pilot project for long-term investment reform of insurance funds, with approved scales of 500 billion yuan in October 2023, 550 billion yuan in January 2025, and 600 billion yuan in March 2025, is expected to bring a large amount of long-term capital into the capital market with the implementation of the third batch of 600 billion yuan for the pilot project, thereby helping to stabilize and improve the capital market. Accelerated entry of insurance funds into the market, expected to increase allocation to high-quality large-cap blue-chip stocks As an example, in early 2024, China Life Insurance and New China Life Insurance each invested 25 billion yuan to jointly establish the 500 billion yuan Honghu Zhiyuan (Shanghai) Private Equity Securities Investment Fund Company Limited (referred to as "Honghu Fund Phase I") to invest in the stock market and hold for the long term. By early March 2025, Honghu Fund Phase I had successfully invested 500 billion yuan, mainly in key industries related to national economy and people's livelihood. In April 2025, Honghu Fund Phase II raised 20 billion yuan, with China Life Insurance and New China Life Insurance subscribing to 10 billion yuan each, mainly investing in large listed companies A+H shares that meet the criteria of good corporate governance, stable business operations, relatively stable dividends, and relatively good stock liquidity in the CSI A500 Index. Recently, the China Banking and Insurance Regulatory Commission has approved China Life Insurance and New China Life Insurance to participate in the third batch of pilot projects for long-term investment reform of insurance funds, indicating that the two institutions will jointly initiate Honghu Fund Phase III. Honghu Fund Phase III is expected to adhere to the principle of "long-term investment," investing in and holding high-quality large-cap blue-chip stocks for the long term. With policy support in the future, insurance funds are expected to accelerate their entry into the market. Risk warning: Economic recovery is slower than expected, long-term interest rates decline, and capital market volatility intensifies.