HengTai: Pension Investment Signals Government Determined to Bailout Market

HengTai says the government's decision to invest local pension funds with the central government fund show the government's determination to rescue the market. How fast it happens is another question. Although the government may be blamed for letting a bear market happen, it would face far more justified blame if it puts a large amount of pension assets into an overheated market and subsequently loses money.

机构及专家全面解读养老金入市影响：显示国家救市决心

Interpretation: "basic pension insurance fund investment management approach" to the public for comments

According to Xinhua News Agency, Human Resources and Social Security and Ministry of Finance jointly with relevant departments drafted the "basic pension insurance fund investment management approach" draft, from the now open for comments. Feedback from the public by Human Resources and Social Security and Ministry of Finance Portal. The deadline for comments is July 13, 2015.

...Currently, due to the lack of investment channels operate, the vast majority of pensions are required to deposit a bank or buy a small amount of government bonds, yields a result not withstand inflation and suffered "invisible shrink" of the storm. In fact, in the past few years, China's basic pension fund investment reforms also had two attempts, the first time in around 2008, the second round of reform began in 2011, but ultimately did not make the trip twice reform.

Notice how the supposed genius economic planners decide to invest the pension funds right near market peaks, then get scared and delay until the next market peak? In 2008 the stock and real estate markets peaked. In 2011, the stock market was in a multi-year decline and the real estate market needed government rescue. Is this time any different? Hopefully, the government will start investing slowly, waiting for better prices, and not behave like short-sighted corporate managers who announced the largest stock buybacks at the peak of the bull market.

The return from the central fund has been good:

Reporters from the 2014 annual report of the National Fund for Social Security Fund Council recently released see, in 2014, the National Social Security Fund investment income amounted to 142.46 billion yuan equity, return on investment rate of nearly 11.7%, exceeding the inflation rate 9.69 percentage points over the same period; and despite the investment rate of return Social Security Fund fluctuate with market conditions, the Fund since its inception, its average annual investment rate of return is higher than the average annual inflation rate. Today, Shandong Province, commissioned the National Social Security Fund Council pension investment operations 100 billion fund balance, Guangdong will entrust extended to 2017.