Nomura lifts target prices for Chinese insurers to 12%

The adjustment follows a 100 basis point reduction in its risk discount rate.

Nomura raised the target prices of the monitored Chinese insurers to 12% on average, reflecting reduced risks related to negative spread and property investments. 

This adjustment follows a 100 basis point reduction in its risk discount rate to account for a marginal decline in negative spread risk, a primary concern in the sector along with the decreasing interest rate trend. 

The cost of liabilities has likely reached its peak and is starting to decrease due to pricing rate cuts under regulatory guidance. 

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The duration gap between assets and liabilities is expected to gradually narrow, supported by the availability of ultra-long-term special treasury bonds.

Risks associated with property sector investments are expected to ease as the government implements supportive policies.

This adjustment reflects Nomura’s positive outlook on the sector's fundamentals and prospects.