China Life Insurance

Frenzy fails to prop up H-share cousins

PUBLISHED : Wednesday, 10 January, 2007, 12:00am
UPDATED : Wednesday, 10 January, 2007, 12:00am

The Hong Kong-listed shares of China Life Insurance failed to match the stunning debut yesterday of the company's Shanghai-traded A shares, as investors took profit from the H shares amid soured sentiment towards mainland financial stocks.

The H shares of China Life, the country's largest life insurer, fell 4.66 per cent to close at HK$25.60 after rising as much as 7.26 per cent to HK$28.80 earlier in the session.

The A shares gained 106.2 per cent on their first trading day from their 18.88 yuan offer price to close at 38.93 yuan.

The insurer earlier raised 28.3 billion yuan by selling 1.5 billion new A shares, or 5.3 per cent of its enlarged share capital, in an initial public offering.

'The price gap between the H shares and A shares has been stretched,' said Andy Lam, an investment research associate director at Harris Fraser (International). 'Mainland investors value China Life's A shares at about 111 times over its [historical] earnings while Hong Kong investors are only willing to pay about 53 times its earnings.'

The dip in the H-share price came after some investment banks suggested China Life's investors should take some profit in the light of its lofty share price, which last year surged 276 per cent, analysts said.

'Some big investment banks have already warned that China Life is overvalued, given that it's now the world's most expensive life insurance stock,' said Ricky Tam, an investment director at Champlus Asset Management.

BNP Paribas in a research report advised investors to sell mainland insurance stocks, including China Life, after the People's Bank of China late on Friday ordered an increase of a half percentage point in banks' capital reserve ratio.

JP Morgan predicted shares in China Life would slip to HK$17.