China stocks shrug off seizure of Anbang amid signs of state support

China shares extended their rebound on Friday, shrugging off Beijing's seizure of high-flying conglomerate Anbang Insurance Group amid signs the government is once again supporting the country's stock markets after their recent rout. The unprecedented takeover of a major non-state company underscores how far the communist Party will go in its growing campaign to reduce dangers to the financial system after years of break-neck growth.
Anbang had violated laws and regulations which "may seriously endanger the solvency of the company", the China Insurance Regulatory Commission (CIRC) said in a statement, without giving details. Anbang is one of China's biggest insurance conglomerates. It claims 1.97 trillion yuan ($311 billion) in assets and ranks 139 on the Global Fortune 500 list.
But Sun Lijin, an analyst with Pacific Securities, said the government's takeover "could have rather limited impact on the stock market." While dramatic, investors believe the move could prevent excessive shocks to the market by giving authorities more room to resolve financial risks related to Anbang and overhaul the firm, Sun added.
Insurance industry insiders also said they believed the move had more to do with Anbang's behaviour than broader systemic risks. The blue-chip CSI300 index ended up 0.5 percent to 4,071.09 points, while the Shanghai Composite Index gained 0.6 percent to 3,289.02 in a holiday shortened week.
Both indexes have rebounded over 7 percent from a low hit on February 9, the depth of a rout triggered by global market turmoil. Investors focused instead on signs that the government has once again stepped in to stabilise markets following the heavy selling early this month and ahead of key political gatherings in coming weeks.
China's five state-backed mutual funds boosted their equity holdings during the recent market slump, the official Shanghai Securities News reported on Friday. Meanwhile, China has suspended publishing its volatility index as regulators step up efforts to curb speculative trading. In light of government support, analysts said the Anbang incident has long been priced in.
"The event had been fermenting for quite some time since 2017," said Chen Xiaopeng, analyst at Sealand Securities. Chairman Wu Xiaohui, who had been prosecuted for economic crimes, was arrested in June.
Chen added that the fundamentals of most listed firms in which Anbang holds stakes - mostly banking and property stocks - are relatively solid. Most of the Anbang-invested shares, including Vanke, Financial Street, Gemdale, China Minsheng Banking and China Merchants Bank gained on Friday, with few signs of panic-selling.