How has the market performed after the recent adjustments in risk factors by insurance companies and the introduction of leverage policies by brokerages?
The China Banking and Insurance Regulatory Commission has lowered the risk factors for insurance companies. Wu Qing mentioned broadening the capital space and leverage limits for securities firms. The Guojin Strategy Team believes this may signal a new round of easing capital conditions, bringing in incremental funds and benefiting the long-term asset side of non-bank institutions. Historically, the market has performed well after similar policies were introduced, with the non-bank sector achieving excess returns
On Friday, the China Banking and Insurance Regulatory Commission lowered the risk factors related to insurance companies' businesses. Meanwhile, on Saturday, Wu Qing mentioned the need to moderately expand the capital space and leverage limits for securities firms. The Guojin Strategy Team stated that this could signal a new round of relaxation of capital conditions for securities and insurance.
This may lead to two impacts: on one hand, for the entire market, the reduction in capital occupation by insurance and other sectors can bring more incremental funds to the market; on the other hand, against the backdrop of a rebound in A-share earnings that have already bottomed out, the expansion of funds and increase in leverage for non-bank institutions will benefit the long-term asset side of non-banks even more.
Looking at the past few instances of insurance lowering risk factors and the introduction of leverage policies for securities firms, the market performed well in the 1-3 months following these changes, with the non-bank sector generating excess returns compared to the entire A-share market. (Guojin Strategy Team)
