CHINA on Friday authorized its insurers to take part in securities lending, potentially boosting short-selling activities in the country’s stock and bond markets. Banks, brokerages and mutual fund houses in the country can already conduct the business, lending securities holdings to other market players, such as short-sellers, for interest income. The China Banking and Insurance Regulatory Commission (CBIRC) published rules Friday, allowing domestic insurers to participate in securities lending. The move could help insurers improve returns on their long-term, and sizable stock and bond holdings, the CBIRC said in a statement. In addition, the measures “can help improve market liquidity and vibrancy,” the CBIRC said. According to official data, Chinese insurers held 11.6 trillion yuan (US$1.82 trillion) in bonds, stocks and securities funds at the end of October. Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management, welcomed the move, saying that “improving China’s short-selling mechanism can decrease market volatility, and push market prices of securities closer to their intrinsic value.” It will also reduce the chance of market bubbles, while creating additional income for insurers, he said. Regulators in China cracked down on short-selling activities during the stock market crash in 2015, and blamed foreign short-sellers. Although China has gradually relaxed short-selling rules over the past years, the size of the securities lending business remains small. The outstanding value of securities lending stood at 149.8 billion yuan at the end of October, less than 9 percent of the outstanding value for margin loans, according to official data. The CBIRC said Friday that securities lending business in other countries and regions reached 2.3 trillion euros (US$2.60 trillion) at the end of last year, and the business is a normal practice to improve secondary market liquidity. In the rules published Friday, the CBIRC set the eligibility threshold for the business, and urged insurers to strengthen risk controls when participating in securities lending. (SD-Agencies) | 