HK Stock Market Move | The stock of domestic insurance companies continues to decline, and insurance stocks face certain pressure on their third-quarter performance. Institutions still see value in the sector's allocation.

The insurance sector continued to decline, as of the time of writing, The People's Insurance (01339) fell by 4.57% to HK$6.47; PICC P&C (02328) fell by 3.82% to HK$17.35; China Pacific Insurance (02601) fell by 3.4% to HK$30.64; New China Life Insurance (01336) fell by 2.81% to HK$43.6. Industrials stated that the insurance sector's performance has been relatively weak recently, mainly due to the significant increase in investment, putting pressure on the third-quarter performance of insurance stocks. In the medium to long term, the value reassessment logic derived from the current interest rate differential disruption is still in progress. On one end, the bottoming out of long-term interest rates combined with increased equity allocation to OCIs brings about investment "efficiency", while on the other end, the reduction in reference interest rates and debt reduction driven by the merger of insurance and banking lead to a decrease in liabilities. The convergence of the two ends in interest rate differential repair is an ongoing process rather than a completed one, making the insurance sector, especially undervalued Hong Kong-listed insurance companies, have good allocation value. Huachuang Securities stated that looking ahead to the third quarter, if the equity market maintains its current level of prosperity in September, structural market opportunities may drive some insurance companies to "withstand" the pressure of high base numbers by actively and flexibly allocating equity assets, achieving positive performance growth. From a longer-term perspective, the continued deepening transformation of dividend insurance, the improvement of the risk bias in the liability side, and the regulatory benefits such as the loosening of solvency requirements will likely drive the central equilibrium of equity allocation in the insurance industry upward, and is conducive to improving long-term investment return levels and mitigating pressure from interest rate differentials on the asset side. Meanwhile, under multiple measures such as dynamic adjustment of reference interest rates, the merger of insurance and banking, and structural optimization on the liability side, the cost of liabilities is expected to continue to decrease.