China Life sells Citic Securities shares

PUBLISHED : Saturday, 14 March, 2009, 12:00am
UPDATED : Saturday, 14 March, 2009, 12:00am

China Life Insurance and its parent have dumped more than 331 million shares of Citic Securities to cash in almost 7 billion yuan (HK$7.94 billion), boosting the biggest mainland insurer's cash flow after a severe loss in the equity market last year.

The securities firm said China Life and its parent had reduced their combined holding in the mainland's largest brokerage to 12.32 per cent from 17.32 per cent as of Wednesday.

China Life sold 301.5 million Citic Securities shares and still held 494 million, or 7.46 per cent of the brokerage, Citic said in a statement. Its parent sold 30 million shares.

Shares of Citic Securities fell 1.7 per cent to 21.30 yuan yesterday.

'It is not unusual for China Life to dump shares on the secondary market,' China Jianyin Investment Securities analyst Xu Shoude said. 'The insurer will stay financially healthy if it doesn't embark on an aggressive expansion strategy this year.'

The insurance giant warned investors in January that last year's earnings would drop more than 50 per cent as it was battered by a 65.4 per cent stock-market slump.

The company earned 28.11 billion yuan in 2007.

Analysts said China Life still sold Citic shares at a huge premium. In 2006, it paid 4.6 billion yuan or 9.20 yuan each for 500 million Citic shares in a private offering, becoming the brokerage's second-largest shareowner.

TX Investment Consulting analyst Zhang Chunlei said the recent market rally and hopes for a resumption of initial public offerings boded well for Citic's earnings outlook this year.

'The sale was a result of Citic's fundamental problem,' he said. 'China Life will continue to be a major shareowner of the brokerage.'

In February, Ningbo Younger, a garment maker, announced it had sold 175 million Citic shares.

The brokerage forecast its profit for last year would hit 7.3 billion yuan, down 41.2 per cent from 2007.