Almost 1 trillion yuan could be invested in equities

Some of China's pension fund assets may be channeled into domestic stocks as early as 2016, a government official said on Tuesday.

The move would lay a solid foundation for the long-term stability of the domestic stock markets, experts said.

Li Zhong, spokesman for the Ministry of Human Resources and Social Security (MOHRSS), said during a press conference on Tuesday that these funds are now held by provinces, cities and counties, and it's necessary that these funds be aggregated at the provincial level before any such investment could be carried out.

The MOHRSS and the Ministry of Finance are drawing up a procedure for this process, Li noted at the press conference.

"We'll make the best use of our time and work toward the goal of implementing pension fund investment in 2016," Li said.

The State Council, China's cabinet, released a guideline on August 23 that allows China's massive amount of pension funds to be invested in new products, including domestic stock markets. However, it said that no more than 30 percent of total assets could be invested in stocks and equities.

Domestic pension funds, which account for about 90 percent of the country's total social security fund pool, amounted to 3.5 trillion yuan ($551 billion) as of the end of 2014, the Xinhua News Agency reported on August 23.

According to a report by domestic finance news website yicai.com on Tuesday, pension fund reserves in as many as nine provincial-level regions in China had exceeded 100 billion yuan as of the end of 2014.

Li Daxiao, director of research with Shenzhen-based Yingda Securities, told the Global Times on Tuesday that moving some of China's massive base of pension funds into the domestic stock markets would lay the foundation for the long-term stability of the Chinese mainland's stock markets.

Li Bo, an analyst at GF Securities, told the Global Times on Tuesday that based on the experience of other countries, such as the US, domestic pension funds' entry into the stock market would definitely boost the mainland market.

Mainland stocks plunged from mid-June to the end of August, before demonstrating some mild signs of recovery.

The State Council also stressed in guidelines issued in August that the pension fund investment should be "active" as well as "cautious," noting that management of the fund must control risks and prioritize safety.

Li of Yingda Securities said that blue chips, which are well-established companies with a track record of generating profits, are most likely to benefit from the pension fund investment project.