China's securities regulator is encouraging more institutional funds to enter the stock market as part of efforts to restore market confidence and improve market mechanism.

Shang Fulin, director of the China Securities Regulatory Commission, said the body is looking at raising the proportion of long-term capital and institutional investments, such as insurance capital, pension funds and corporate pensions, in stocks.

The commission will also develop fixed-income products, such as corporate bonds, encourage listed companies to increase dividends and improve tax policies to create a sound environment for investors, Shang said yesterday in Shenzhen.

Institutional investors held stocks worth 50 percent of the market's value at the end of November, but the number of such investors in China is still relatively small, he said at the 7th China Securities Fund Forum International.

Dai Xianglong, chairman of the National Council for Social Securities Fund, said on Friday that more pension funds will be invested in stocks to seek a stable income.

Industry sources said 10 billion yuan (US$1.45 billion) of pension funds were injected into the stock market last month.

"The move by the pension fund will have a positive effect on the ailing market as it indicates its confidence about the country's economy,'' said Huang Feng, an analyst at Bohai Securities Co.

(Shanghai Daily December 3, 2008)