Hong Kong Stocks "Say" | After Tech Stocks, Insurance Stocks Begin to Drag Down the Market

Ask AI · How does the decline of insurance stocks affect the overall index trend of the Hong Kong stock market?

Reporter: Zeng Zijian Editor: Yuan Dong

After rebounding for two days, today (March 26) the Hong Kong stock market suffered another heavy blow.

In addition to technology stocks, insurance stocks have also joined the ranks of the sell-off that dragged the market down. Among them, China Life (HK02628) performed the worst, with its stock plunging over 9% at one point during the session. Additionally, New China Life, Ping An of China, and China Pacific Insurance also experienced significant declines.

According to the annual report, China Life’s revenue last year was 616.065 billion yuan, a year-on-year increase of 16.54%, and the net profit attributable to shareholders was 154.078 billion yuan, a year-on-year increase of 44.09%. The data seems to indicate steady growth. However, the key issue is that China Life posted a quarterly loss of 13.7 billion yuan in the fourth quarter of last year, which fell below market expectations and directly triggered today’s sell-off. Before February this year, China Life’s H-share price had been strong, reaching a peak of 36.16 HKD, but today it dropped to 24.82 HKD at one point, with a cumulative decline of over 31%.

The reason for China Life’s fourth-quarter loss last year primarily stems from structural adjustments in the capital market, where the stocks and equity assets such as funds held by the company clearly retraced, leading to the quarterly loss. Although the cyclical fluctuations of investment income cannot represent the long-term operational trend of an insurance company, I believe that the aforementioned situation still brings significant short-term negative impacts to the market.

For insurance companies, investment income is a very important source of profit and a core driving force for profit growth. The fluctuations in investment income are closely related to the securities market. Insurance companies, like public funds, private equity, brokerages, and foreign institutions, are among the most important institutional investors in the securities market. However, in terms of the A-share market, public funds have the largest investment scale in stocks, followed closely by insurance capital. Therefore, when the stock market performs well, the performance growth of insurance companies is very apparent; once the stock market declines, the investment income of insurance companies will also significantly drop.

Currently, the market seems to have entered a vicious cycle. The decline in the stock market leads to reduced investment income for insurance institutions, even resulting in quarterly losses. These quarterly performance losses cause significant drops in insurance stock prices. Stocks like China Life, Ping An of China, and New China Life, due to their large weights in the Hang Seng Index, directly drag down the index’s decline. For the Hang Seng Index, the banking sector is the largest weighted industry, accounting for about 20%, while insurance accounts for over 9%, placing it in the second tier.

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