oblivious to the sharp falls that have buffeted the Chinese markets
this week, investors piled into the latest China IPO, Ping An
Insurance, and sent the price up 50% at the opening of first-day trading on the Shanghai exchange today.
The IPO raised $5bn for China's second largest insurance company. As
the hefty first-day pop shows, Ping An could have raised a lot more
from Chinese investors, who apparently still feel Chinese IPOs are a
The offer drew a massive 1 trillion yuan in subscriptions from
institutional and retail investors, the second largest amount for a
domestic IPO. Industrial Bank holds the record with almost 1.2 trillion
yuan in subscriptions during its Shanghai IPO in January
Shenzhen-based Ping An is quoted on a huge premium to western
insurers that is rivalled only by fellow insurer China Life, which
listed on the Shanghai exchange in January.
Priced into that premium is the soar-away performance of China's
equity markets last year, as investment income has become the main
driver for profits growth at Ping An.
Life insurance is the biggest contributor to the income and Ping An
had 16% of China's insurance market in 2005. Total life insurance
premiums grew 20% at the half-way stage last year while property and
casualty premiums jumped 33%.
Investors clearly expect the growth story to continue and China's
insurance sector is an obvious play on China's rising middle class.
HSBC thinks the future looks bright, as it holds a minority stake in
Ping An, which is already listed in HK. More on HSBC and Ping An in this EngagingChina story.