(Xinhua)
Updated: 2008-04-23 23:53

BEIJING - Chinese insurers, a major institutional investor sector, were urged on Wednesday to make long-term investments in the stock market and fend off risks amid price fluctuations.

Insurers should "stick to the idea of long-term value investment" and "strengthen their confidence in economic and financial development in the long term", said Yuan Li, spokesman for the China Insurance Regulatory Commission (CIRC).

Chinese insurers had 568 billion yuan (US$ 81 billion) invested in stocks, equities and securities funds at the end of March, about 21.4 percent of their total investment capital, said Yuan.

They were down from the 683.1 billion yuan, or 26 percent, at the end of October last year. China's main market index, the Shanghai Composite, reached a high of 6124.04 points on October 16 and has since tumbled by almost half.

The stock plunge drove insurers' capital to the bond market, with their investment in bonds rising to 1.3 trillion yuan, or 49.4 percent of the total invested capital, at the end of March from 40.9 percent in October, according to figures provided by Yuan.

Market talk over a large-scale retreat of institutional investors from the stock market has intensified investor fears of weak performance.

It was a market-oriented act by insurance companies to adjust their investment in stocks and the CIRC would not intervene too much, said Yuan.

The market rallied to see the composite index rise by 4.15 percent to 3,278.33 on Wednesday, still 46.5 percent lower than the peak in October.

Institutional investors in China's stock market include securities funds, qualified foreign institutional investors, insurance capital, corporate annuities, social security funds and others.

They accounted for almost half of the value of all traded Chinese shares, according to CIRC vice chairman Yao Gang, who said in late February the proportion of stock investment by insurance funds, corporate annuities and social security funds should be expanded.

The government allowed insurance companies to directly invest in the stock market from 2005.

Chinese insurers had a total investment capital of 2.7 trillion yuan at the end of March, from which returns totaled 31.13 billion yuan in the first quarter with an average yield of 1.2 percent, said Yuan.

The country's insurance premiums in the first quarter soared 51.6 percent year on year to 297.9 billion yuan, he said.