Insto roundup: Insurers to get go-ahead to buy China rivals; Temasek sells company stakes
AUSTRALIA
Hesta announced it had appointed recent-hire Paul Galloway as general manager for strategic tilting, as the superannuation fund continues to revamp its investment team.
“Luke will work closely with our trading partners and our investment execution team to manage and minimise execution risks, while ensuring portfolios are responsive to market conditions and opportunities,” said chief investment officer Sonya Sawtell-Rickson. She added that the appointment continued the implementation of a new investment team structure announced in March.
Galloway, who joined Hesta as an investment adviser in November 2019 before being promoted, will report to the head of portfolio design, for which Hesta is still recruiting, and will be responsible for managing dynamic asset allocation, rebalancing and overlay processes.
Source: Mirage News
CHINA
China’s short-term goal of pulling its economy out of the trouble created by the coronavirus pandemic will likely exacerbate the existing pressure on a national pension system already strained by an ageing population, and could cause funds to run out sooner.
Traditionally Chinese employers pay up to 20% of their employees’ salary into government pension funds, while employees contribute an additional 8%. But in February Beijing made micro, small and medium-sized firms exempt from paying mandatory contributions to provincial funds for pensions, unemployment and work-related injuries until June, while large enterprises could halve payments between February and April.
The move to reduce contributions will only worsen the country’s already acute problem of paying the rapidly rising number of retirees. Last year, the Chinese Academy of Social Sciences forecast that the value of China’s national pension fund would peak at Rmb6.99 trillion ($985 billion) in 2027 before gradually running out by 2035.
Source: South China Morning Post
China plans to make it easier for foreign life insurers to make controlling acquisitions and large equity investments in domestic peers, five people with knowledge of the matter said. Under the new rules being considered, the China Banking Insurance Regulatory Commission would let foreign life insurers own more than one main business license, the sources said.
Existing regulations allow overseas life insurers with operations in China to own up to stakes of up to 15% in local rivals. The new rules would pave the way for foreign insurers to acquire a controlling or significant minority stake in a local peer, and run that business separately from existing joint ventures or wholly owned operations. The new rules will likely be finalised in the second half of the year, sources said.
The draft plan is part of Beijing’s efforts to bolster the capital levels of small and mid-sized local players, amid concerns about the impact of the new coronavirus pandemic on their financial foundations.
Source: Reuters
JAPAN
Fukoku Mutual Life Insurance plans to step up investments in risk assets such as stocks and foreign bonds, seeking portfolio diversification to secure a steady income to offset low global bond yields.
Japanese life insurers have been big players in the US and European bond markets for many years as the Bank of Japan’s aggressive easing has shrunk domestic bond yields.
While Fukoku Life expects markets to remain volatile for the time being, it plans to increase the holding of Japanese stocks by ¥20 billion ($185 million) and foreign stocks by ¥50 billion in the current year through March, Yusuke Onodera, general manager of investment planning at Fukoku, said on April 14.
Source: Reuters
KOREA
Prudential Financial has sold its South Korean insurance arm to KB Financial Group for about W2.3 trillion ($1.9 billion).
KB Financial’s final bid of around W2.3 trillion was the highest among the three shortlisted bidders which also included two Seoul-based private equity firms MBK Partners and Hahn & Company.
Source: Nasdaq
State-run policy lender Korea Development Bank is in talks with South Korea’s private equity firm JC Partners to sell a life insurer unit as part of its restructuring process, an industry source said April 13.
JC Partners is the only bidder participating in the preliminary stage that is undergoing a due diligence for the acquisition, the source added. KDB said further details could not be disclosed because the talks are ongoing with the potential buyer before signing a deal.
Source: The Korea Herald
MALAYSIA
Sovereign wealth fund Khazanah Nasional has reaffirmed its commitment to continue supporting Malaysia Airlines via its parent company Malaysia Aviation Group. A source from Khazanah said the support is deemed as “strategic needs” of Malaysia to maintain air links amid the Covid-19 crisis.
“It is still uncertain at this point in time. However, we could not determine (quantify) on our assistance that will be extended to the national carrier,” he told the New Straits Times on condition of anonymity as the matter discussed was confidential.
Source: New Straits Times
In addition, Khazanah announced it was contributing RM20 million ($4.61 million) to support relief efforts in response to the Covid-19 pandemic.
The contribution will be channelled through the government-linked companies and government-linked investment companies Disaster Response Network that is assisting the Ministry of Health and other groups in urgent need.
“Many of us are already contributing a portion of our monthly salaries to this fight and I encourage everyone to do so if they are able to afford it,” Khazanah managing director Shahril Ridza Ridzuan said in a statement issued on April 6.
Source: Malay Mail
SINGAPORE
Singapore’s GIC has teamed up with Australian Reit Dexus to buy a 50% stake in a Melbourne’s commercial property company for A$644 million ($398 million) through an off-market transaction.
ASX-listed Dexus announced in a bourse filing yesterday that the pair had set up a joint venture to acquire the half-stake in the Rialto Towers, with GIC taking a 90% share in the JV while Dexus will hold 10%.
The Singapore-led venture is buying the 50% stake from Kuwaiti sovereign wealth fund-owned St Martin’s Property, which co-developed the 55-storey complex in a 50:50 joint venture with Aussie developer Grollo Group in the 1980s.
Source: Mingtiandi
GIC, alongside Global Infrastructure Partners and Brookfield Asset Management, is in discussions to bid for a stake in Abu Dhabi National Oil Company’s natural gas pipelines, which could be valued at about $15 billion, people with knowledge of the matter said.
Italian infrastructure operator Snam and Ontario Teachers Pension Plan are also in discussions to join the group, which has been pursuing as much as a 49% stake in the assets, the people said.
Source: Deal Street Asia
Singapore state investor Temasek Holdings has been selling stakes in companies from its portfolio recently, raising a total of $779 million in the past two weeks.
On Tuesday, Temasek bagged $186 million through the sale of shares in Thailand’s Intouch Holdings, while last week it raised $507 million from two block trades in South Korea’s Celltrion and its distribution affiliate Celltrion Healthcare.
Source: Bloomberg
TAIWAN
The slump in US corporate bonds is likely to spur bargain hunting by Taiwan life insurers with Cathay Life Insurance, the largest insurer by assets in Taiwan, having already stepped into the market.
"We have bought US investment grade long-tenor corporate bonds on dips in March, as credit spreads widened a lot," said Abel Lin, managing senior executive vice-president at Cathay Life. "We will continue to add such bonds."
Taiwanese life insurers had NT$785 billion (S$36.9 billion) of bank deposits at the end of January, the most since 2012, according to data compiled by Bloomberg. Any dry powder would still be just a fraction of the NT$29.8 trillion - the better part of US$1 trillion - in life insurers' assets as of the end of February, according to data from the Financial Supervisory Commission.
Source: Business Times
GLOBAL
Half of institutional investors have not fully implemented their investment plans for China, indicating that widespread allocation changes appear to be on the horizon, found a survey of 118 asset owners by research firm Greenwich Associates and fund house Matthews Asia.
A large number of respondents say they don’t have a clear understanding of their own exposure to the country, while almost 20% plan to increase their dedicated allocation to China’s equity markets in the next three to five years.
However, nearly 50% of investors in the study are holding back on dedicated China equity allocations primarily due to low trust in China’s government, questions about market access, and negative perceptions of corporate governance policies.
Source: Greenwich Associates
Exchange-traded funds that make bearish bets saw record inflows in late March as investors braced for another potential drop in markets, according to fund flow tracker EPFR.
Bear ETFs, including those that use leverage, attracted $6.04 billion during the week to April 1, smashing the previous $1.57 billion record set during the final week of January 2018, EPFR data shows.
Investors flocked to the funds after stock markets cratered last month on concerns over the coronavirus pandemic’s damage to the economy.
Source: Institutional Investor