More Enterprise Annuities to Make Stock Investment

The proportion of stock investment with enterprise annuities is expected to rise to not higher than 30% of an enterprise's investment portfolio.

As at the yearend of 2009, the amount of China's enterprise annuities totaled to CNY 252.5 billion and the figure reached CNY 300 billion by December 2010, based upon the average annual increment of CNY 46.1 billion over the past four years. If it is so, up to CNY 90 billion enterprise annuities could be available for investing in domestic stock market. Actually, available data showed that the fund management companies had more than CNY 100 billion enterprise annuities under management by mid-2010.

Still, many fund managers predict that there will not be a large amount of enterprise annuities entering the A-share market. On the one hand, most of the fund firms manage the enterprise annuities for those enterprises under the direct administration of the State Council. Usually, the work procedure of such enterprises is complicated while their work efficiency is low. On the other hand, the fund institutions are not that aggressive when operating the enterprise annuities.

Presently, the proportion of stock investment with enterprise annuities is limited at 20% of an enterprise's investment portfolio. At the time of raising such a proportion, related supervisory department has also adjust up the investment proportion in such fixed-income instruments as time deposit, contracted deposit, treasury bonds, convertible bonds, investment-linked insurance products and so forth.

Last year, China's National Social Security Fund (NSSF) as a large institutional investor of the country selected seven fund management institutions as the domestic investment managers, thus adding the number of such funds up to 16. Actually, it is not a profitable business for these fund firms to act as the investment managers of NSSF. They are understood to make preparation for the future pension management business. On the one hand, the pension investment can bring stable returns; and on the other hand, such returns on investment are long-term yields instead of short-term yields.

By the yearend of 2009, the combined scale of China's pension market stood at CNY 2.25 trillion, accounting for 6.62% of the gross domestic products in the year, far lower than the average level of between 40% and 50% in those developed nations. Industry insiders disclosed that the market value of NSSF's entrusted investment is CNY 302.4 billion currently, accounting for 44% of the Fund's total assets; and the investment portfolios include stock-oriented products, bond-oriented products and hybrid products.