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Insurers, brokers fall by 10% daily limit

(China Daily)
Updated: 2008-01-29 07:16

China's insurers, among the world's most valuable after reaping record gains from a stock rally, fell by the 10 percent daily trading limit yesterday as the benchmark Shanghai Composite Index plunged 7.19 percent to a nearly six-month low.

China Life Insurance Co, the nation's largest insurer, closed at a seven-month low of 41.04 yuan.

Ping An Insurance (Group) Co and China Pacific Insurance Group Co also dropped by the daily limit to close at 72.53 yuan and 35.83 yuan respectively.

Domestic insurers risk "massive" redemptions and liquidity difficulties should markets slump, the industry regulator warned on Jan 25.

"Once the capital market heads for a downturn, we will suffer very badly and face huge risk," said Wu Dingfu, chairman of the China Insurance Regulatory Commission. "There can be massive redemptions and insurers may face liquidity difficulties."

China Life and rivals earned a record 279.2 billion yuan from investment returns last year, more than the previous five years combined. The gains underscore the industry's dependence on a stock market that has lost 20 percent from its Oct 16 peak after surging more than sixfold in the previous two years.

China's brokerages, another sector closely linked to the performance of the stock market, also fell by the daily limit.

CITIC Securities Co, Asia's biggest brokerage, declined 10 percent in Shanghai to close at 68.42 yuan. The company's shares have lost 41 percent from their record of 116.52 yuan on Nov 2.

About half of brokerages' revenue is made by trading stocks for clients. They made record profits last year as the CSI 300 Index almost tripled, fueled by 573 million investment accounts opened in the first 11 months of 2007.

Haitong Securities Co declined by 10 percent to 44.79 yuan.

China's stock exchanges don't allow a company's shares to fall or rise more than 10 percent from the previous day's close.

Other brokerages that dropped by the daily limit included Hong Yuan Securities Co, to 31.79 yuan; Northeast Securities Co, to 42.74 yuan; Guoyuan Securities Co, to 33.16 yuan; and Changjiang Securities Co, to 27.52 yuan.

Sinolink Securities Co, which trades under the name of Chengdu Urban Construction Investment & Development Co after taking over the company, closed 10 percent lower at 50.99 yuan.

Agencies

(China Daily 01/29/2008 page15)



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