Ping An faces flak over cash call
Shares of Ping An Insurance (Group), the mainland's second-largest insurer, fell more than 10 per cent in Hong Kong and Shanghai for the second day as the company's planned 140 billion yuan share placement was criticised by fund managers as overly aggressive and lacking clear targets.
The company's H shares dived 12.49 per cent to HK$59.55, the biggest one-day drop, taking their three-week decline to 27.86 per cent.
Its Shanghai-listed A shares dropped their 10 per cent daily limit for a second consecutive day to 79.55 yuan before trading was suspended in the early session yesterday.
Ping An spokesman Sheng Ruisheng said the company had no intention of scaling back the size of the deal despite the market sell-off yesterday.
'We have no such plan. The current market situation will not change our planned share placement,' said Mr Sheng.
Ping An announced last Friday the sale of no more than 1.2 billion new A shares, which equals about 136.66 billion yuan based on yesterday's A-share closing.
The insurer also plans to sell 41.2 billion yuan worth of A-share bonds with attached warrants.
The proposed share placement is subject to approval by the mainland regulator and Ping An shareholders.
'The plan is not going to receive approval,' said Dennis Wu Piwei, assistant to the general manager at China Eastern Airlines International Financial.
Despite being 'already awash with capital, the additional capital is the sum of PetroChina and China Shenhua Energy's A-share IPOs last year', he said.
PetroChina, the mainland's largest oil company, and China Shenhua Energy, the country's biggest coal miner, raised 66.8 billion yuan and 66.6 billion yuan, respectively, in their Shanghai initial public offerings last November and October.
'It will send further signals to investors that Ping An's management also sees that the share price has reached the top of the cycle,' Mr Wu said.
Analysts had said that because of the difficult market conditions, Ping An might trim the size of the sale.
'What if the company's share price drops below 70 yuan while the offer price stood at 98 yuan? Investors would surely buy shares in the secondary market instead,' said Samuel Chan, an analyst at JPMorgan.
According to the announcement, Ping An will not place the shares at a price lower than the average price of the A shares for 20 trading days immediately prior to commencing the share placement.
'The decline in share prices will in turn damage the company's investment performance. They are highly leveraged to the A-share market,' said Mr Chan.
Aiming high
Ping An's planned share placement has been deemed too aggressive
The company's stock was suspended yesterday after its A shares dropped the 10 per cent limit to, in yuan 79.55
