China is urging state-backed funds to buy more stocks amid a market slump

Chinese financial regulators on Thursday he presented a bunch of measures Asking big state-owned mutual funds and insurers to buy more shares as Beijing seeks to bolster its acclaimed stock market.

It is aimed at large state-owned insurance companies to increase the size and proportion of their investment in shares listed on the continent, and to direct 30% of the new premiums created to buy shares, China Securities Regulatory Commission Chairman Wu Qing said at a press conference on Thursday.

A pilot program, to be launched in the first half of this year, will channel at least 100 billion yuan ($13.75 billion) from insurance to long-term equity investments, Wu said. He hoped to continue expanding the program and inject at least “hundreds of billions of yuan” into share buybacks each year.

There are also mutual funds mandate to raise their holdings 10% annually in mainland listed shares in terms of market valuation over the next three years, he said.

A consortium of six financial regulatorsincluding securities regulators, released the first plan on Wednesday for large funds, including pension funds, to buy more local stocks in a bid to “stabilize stock markets,” according to a CNBC translation of a statement from the regulators in Chinese.

“Having more Chinese stocks by institutions such as insurers helps reduce volatility and create a more stable fundamentals-based trading environment,” said Eugene Hsiao, head of China equity strategy at Macquarie Capital.

He suggested the latest initiative would help “establish more attractive long-term investment opportunities” after the property market crash damaged household wealth.

After the press conference, the benchmark CSI 300 index rose more than 1.8%, paring the index’s decline this year to around 2.7%, according to LSEG data.

While the CSI 300 registered one 15% annual profit last year, the index closed down nearly 12% from the year’s highs.

Beijing’s recent meager stimulus measures have dashed investors’ hopes for a short-term turnaround in the ailing economy and prompted a flood of safe-haven government bond funds, driving yields to record lows.

In October, China’s central bank launched it scheme of exchange facilities to give to insurers and brokers have easier access to buy shares and relatively cheap central bank bills to help finance buybacks and acquisitions of shares in listed companies.

Dividend payments and share buybacks by Chinese companies hit record highs last year, Wu said, while encouraging listed companies to increase dividend payments for the Chinese Lunar New Year this month.

Wu noted that the CSI 300’s current dividend yield reached 3%, “which is significantly higher than the 10-year Treasury yield.” The benchmark 10-year yield was at 1,671 on Thursday.

Thursday’s announcements are expected to lead to capital inflows into China’s “value stocks,” which are significantly undervalued given their high potential for future growth, according to Lei Meng, China equity strategist at UBS.