Guosheng: Policies are vigorously promoting the entry of medium and long-term funds into the market, and the construction sector is expected to receive increased allocation from insurance funds in 2026.

Guosheng released a research report stating that the policy will promote the entry of medium and long-term funds into the market, and the market is expected to continue to attract incremental funds from insurers. Insurers' heavy positions in the construction sector in 2025Q3 amounted to 8.52 billion yuan, accounting for 1.31%. In terms of fund allocation, it is estimated that insurers' allocation to the construction sector in 2025-2026 will be 50.8/79.4 billion yuan, with an incremental amount of 28.6 billion yuan in 2026, accounting for 3.53% of the free float market value. The overall proportion of insurers' investment in the construction sector can refer to the proportion of insurers' heavy positions in the construction sector, taking into account the significant dividend yield advantage of the construction sector. Therefore, insurers may increase their allocation to the construction sector in the future. Guosheng's main points are as follows: - Policy efforts to promote the entry of medium and long-term funds into the market, insurers' allocation to the stock market is expected to continue increasing. - Insurers' heavy positions in the construction sector accounted for approximately 1.31% in 2025Q3, preferring high ROE, high dividend, and undervalued stocks. - In 2026, insurers are expected to increase their allocation to the construction sector by 28.6 billion yuan. Guosheng's calculations show that in 2025-2026, insurers' allocation to the construction sector will be 50.8/79.4 billion yuan, with an incremental amount of 28.6 billion yuan in 2026, accounting for 3.53% of the free float market value. The proportion of insurers' investment in the construction sector can be based on insurers' heavy positions in the construction sector. Considering the significant dividend yield advantage of the construction sector, insurers may increase their allocation to the construction sector in the future, with an estimated allocation of 1.31%/1.60% in 2025/2026. Investment recommendations: According to Guosheng's calculations, key A-share construction companies expected to have a dividend yield of over 5% in 2026 include Sichuan Road & Bridge Group, Jangho Group, Changjiang & Jinggong Steel Building, Anhui Construction Engineering Group Corporation, Shanghai Tunnel Engineering, Shandong Sunway Chemical Group, Sinoma International Engineering, and China State Construction Engineering Corporation. Key H-share construction companies include CHINA COMM CONS, CHINA STATE CON, China Railway Construction Corporation, SINOPEC SEG, CSC DEVELOPMENT, and CTF SERVICES. These companies are expected to receive increased allocation from insurers in the future. Risk factors: - Policy implementation for insurers' entry into the market may be delayed. - Decrease in premium income may lead to lowering insurers' allocation to the construction sector. - Risks related to assumptions and calculations.