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Ping An soars on debut

By Hu Yuanyuan (China Daily)
Updated: 2007-03-02 09:00

Ping An Insurance (Group), China's second-largest insurer, saw its shares jump 38.4 percent on their Shanghai debut yesterday, despite the plunging Shanghai Composite Index.

"The second mainland-listed insurer does not seem to have been impacted by the recent ups and downs in the market, indicating investors' strong enthusiasm for insurance stocks and optimism for the market in the long run," said Dong Chen, an analyst at CITIC China Securities.

After experiencing a fall of 8.8 percent on Tuesday from an all-time high, Shanghai's stock market rebounded 3.9 percent on Wednesday, but was again down 2.91 percent yesterday.

In contrast, Ping An's A shares opened 48 percent higher at 50 yuan against its offer price of 33.80 yuan. It hit a high of 50.97 yuan during the day and closed at 46.79 yuan, making it the most expensive financial stock on the mainland.

Ping An's Chairman Ma Mingzhe said he was happy with the debut price and the company would extend its business into banking and asset management.

The Shenzhen-based insurer is seeking to build a financial services group that will get two-thirds of its revenue from banking, securities and asset management. For the six months ended on June 30, these segments accounted for about 8 percent of Ping An Insurance's net profit.

Yesterday's stock price put Ping An at about nine times its 2005 book value, exceeded only by its rival, China Life, whose stock price is about 11.5 times its book value, and much higher than the world's insurance average of 2.5 times.

"The recent big fluctuation in the market made Ping An's Shanghai debut more rational compared with that of China Life," said Chris Tang, senior manager of Marco Polo Pure China Fund. "But I still don't plan to buy it at such a price."

Tang said her preferred price would be 35 to 38 yuan, depending on the insurer's performance.

In the first nine months of 2006 alone, Ping An's net profit hit 3.7 billion yuan, exceeding 3.3 billion yuan for all of 2005.

Although insurance stocks are popular with investors because of their shortage in the mainland market and the huge growth potential of China's insurance sector, Tang said her primary choice for financial stocks was those of securities companies, followed by insurance and banks.