Hong Kong Stock Review: Insurance Companies' Profits Surge
The Hong Kong stock market review shows that the net profit of the five major insurance companies in the first three quarters totaled RMB 147.2 billion, a year-on-year increase of 263%. The significant profit increase is mainly attributed to the recovery of the stock market in Q3 and the implementation of new accounting standards. Although the low interest rate environment puts pressure on insurance investments, insurance companies need to cope with the liability cost challenges of high-interest products. High-yield stocks such as CNOOC and Shenhua have become investment choices. The listing of Saudi Arabia's first Hong Kong ETF successfully attracted Middle Eastern funds, marking a gradual improvement in policies
Currently, most insurance companies have announced their performance for the first three quarters. Overall, the five major insurance companies - Ping An Insurance, China Life, Taikang, PICC, and Xinhua Insurance - reported a total net profit of 147.2 billion yuan, a year-on-year increase of 263%.
The significant increase is mainly due to the recovery of the stock market in Q3, which greatly boosted investment income, while last year's Q3 also had a low base that further propelled growth. Additionally, the implementation of new accounting standards has increased the volatility of profits.
Under the old standards, the gains and losses of available-for-sale financial assets did not affect profits unless losses required impairment provisions, which meant there was room to adjust profits/losses. Under the new standards, changes in market value directly affect profits regardless of whether assets are sold, thus the coinciding stock market recovery further amplified profit growth.
However, the current low interest rate environment will continue to put pressure on insurance investments. Starting next year, how insurance companies will invest to match the liability costs of insurance products issued at historically high interest rates will be a significant challenge. The only possible solution may be to allocate to high-dividend stocks, which also aligns with policy directions and can manage liquidity.
Among high-dividend stocks, China National Offshore Oil Corporation (CNOOC) and Shenhua have relatively high dividends, but their certainty is not as strong as that of the three major telecom operators, especially since the crude oil market is heavily influenced by political factors. Although OPEC has a production cut agreement, some member countries have not fully complied, and previous geopolitical tensions have not supported oil prices. If a peace negotiation suddenly occurs under these circumstances, oil prices could plummet.
In the past, whenever Western oil stocks fell below $60, Buffett would step in to increase his holdings, but now that it has dropped to the $50 level, he has not increased his holdings for quite some time.
Additionally, yesterday, the first Hong Kong ETF from Saudi Arabia was listed, becoming the largest ETF in the Middle East, and just one day later, the second Hong Kong ETF was also listed today. Although its scale is only $1.5 billion, it successfully attracted funds from the Middle East, marking one of the most successful policies in recent years and indicating a gradual move in a positive direction