China Life expected to price IPO at top end
China Life Insurance, the country's biggest life insurer, will price its yuan-denominated stock at the top end of the indicative range after attracting a record amount of subscriptions from investors, according to a source.
The insurer, seeking a listing before January 11, would price its 1.5 billion new A shares, or 5.3 per cent of its enlarged share capital, at 18.88 yuan each, the top of a range that starts at 18.16 yuan, the source said.
China Life will raise 28.3 billion yuan from the deal to replenish its capital. An official statement is due out today.
'The final pricing is not that high partly because the insurer took future returns of its strategic investors into consideration,' said Jenny Tan, a fund manager at Chang Xin Fund.
'The insurer placed 40 per cent of its A shares with strategic investors and business partners and, if the price is too high, strategic investors won't make gains.'
China Life, which will be the first insurance stock in the mainland market, attracted overwhelming demand from investors on expectations of its future expansion and considerable returns from its stock and direct investments.
The insurer generated subscriptions worth more than 800 billion yuan from private placements and public investors.
This surpassed the record 781 billion yuan set by Industrial and Commercial Bank of China's A-share initial public offering in October, although the China Life deal is 40 per cent smaller.
China Life's H shares closed 11.7 per cent higher at a record HK$27.20 as Hong Kong fund managers expect the shares will be boosted when its A shares start trading next month.
Mainland fund managers tip China Life's A-share price will rise above 30 yuan on the first trading day.
The insurer's H shares have tripled since January.
The sale of A shares will strengthen China Life's ability to pay compensation claims to more than 300 per cent from 250 per cent, a Guotai Junan research report said.