Pension funds to be managed by NCSSF

The National Council for Social Security Fund (NCSSF) has received permission to manage 100 billion yuan (US$15.84 billion) in pension funds from a southern provincial government, the official China Securities Journal reported Tuesday.

It's a landmark move, signaling the determination of the authorities to boost the nation's stock and bond markets, experts told the Global Times Tuesday.

Some 30-40 percent of the funds will be invested in the country's stock markets between January and March, and the rest will be invested in fixed-income assets, the report said.

The benchmark Shanghai Composite Index yesterday surged by 4.18 percent, the biggest gain since October 2009, and the Shenzhen Component Index rose by 4.95 percent.

"This move is definitely good news for the stock markets," Yi Xianrong, director of the Financial Institute at the Chinese Academy of Social Sciences, said yesterday, noting that the recent sluggish performance of the nation's stock markets offers a good opportunity for investment.

The China Securities Regulatory Commission said Monday that the total market value of the country's stocks shrank by 19 percent last year, compared to a year earlier, while the stamp duty on share trading amounted to 42.17 billion yuan in 2011, a 22.7 percent drop year-on-year.

The Securities Association of China also announced Monday that the country's 109 securities companies earned total profits of 39.4 billion yuan last year, a drop of 49 percent from 2010.

"The biggest winner from pension funds investing in stock markets will be the tax collector, money managing agencies and securities companies," Ye Tan, a financial commentator and writer, told the Global Times yesterday.

Ye cautioned, however, that investing in the stock market carries certain risks and that management of the funds will require careful supervision.

"Most importantly, plans for how to handle the consequences if the pension funds do badly in the stock markets are urgently needed," Ye said.

Dai Xianglong, chairman of the NCSSF, said over the weekend that it was possible that more provinces could join the experimental program of investing the nation's pension funds, which were worth a total of 1.8 trillion yuan by the end of last year.

Up to now, it has only been possible for pension funds to be lodged with banks and invested in central government bonds, resulting in negative real returns over the past decade, said Dai.

"The pension funds themselves will be the biggest beneficiary, I think," said Li Daxiao, director of Yingda Securities.