Chinese insurers are investing more in stocks than they have in over three years, thanks to Beijing’s efforts to maintain a stable bull market. Data shows these investments surged by 640 billion yuan ($90 billion) in the first half of 2025, bringing total equity holdings to 3.1 trillion yuan, which is 8.5% of their total assets. Experts expect this trend to continue, with Morgan Stanley predicting purchases of over 1 trillion yuan in Chinese and Hong Kong equities this year. Analysts say that long-term insurance investments can improve market liquidity, help dividend-paying companies and industry leaders, while keeping valuations steady.

Policy Changes Favoring Equity Investments

To support this trend, authorities have relaxed investment limits, raised allocation requirements, and reduced capital charges. Strategists believe this trend will carry on through 2026. However, increased investments may lead to more volatility during economic downturns. Even with potential risks, low bond yields and supportive regulations suggest that insurers will remain crucial in the Chinese equity market. With substantial and ongoing capital flowing from insurers, we can expect a more stable and slowly rising market. This consistent buying pressure should reduce overall market volatility in the coming weeks. We have already seen this impact, as the implied volatility on CSI 300 index options has dropped to its lowest level since the second quarter of 2025. Considering the outlook for a steady, less volatile rise, we should adopt strategies that take advantage of this environment. Selling cash-secured puts or using bull put spreads on broad market ETFs tracking the A50 and CSI 300 indices looks promising. These strategies will benefit from both the gradual upward trend and from option premiums decreasing over time. The capital is particularly focused on dividend-paying stocks and leading sectors, so our equity strategies should mirror this. We should target large-cap financials and well-established consumer brands known for their reliable dividend payouts. As of early September 2025, the CSI Dividend Index has outperformed the broader market by over 6% year-to-date, indicating where institutional investments are concentrated.

Market Support and Risks

However, we must remember the government-supported rally of 2014-2015, which was followed by a sharp decline. While this investment flow offers a solid support level for the market, it could also lead to complacency and a swift reversal if sentiment changes. This is why it is wiser to use defined-risk strategies like spreads rather than holding naked short options. This institutional investment trend comes amid decent economic data, such as last month’s manufacturing PMI, which remained just above the 50-point mark indicating growth. With low bond yields, equities offer a clear advantage for large funds seeking returns. This supports a stable market outlook through the end of the year, creating an ideal environment for selling volatility. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now