According to a filing with the Hong Kong stock exchange, Chow Tai Fook also had a short position in 196 million Ping An H shares in the form of cash-settled unlisted derivatives. However, Ping An's announcement did not disclose that Cheng had short positions in the stock.

CCB International analyst Kenneth Yue said in a report that Ping An 'did not offer satisfactory justification for why its shares should be placed with Chow Tai Fook instead of being offered to existing shareholders'.

Yue and other analysts also see short-term weakness in Ping An shares as a result of the placement.

The placement with Cheng, the chairman of New World Development, was issued under the 'general issue mandate'.

Ping An, which counts banking giant HSBC Holdings as a substantial stakeholder, received approval from shareholders in an annual general meeting in June last year to issue new shares equal to 20 per cent of existing issued shares, without offering them to existing shareholders first, at any time before the next annual general meeting.

Ping An said the placement would broaden the shareholder and capital base, increasing its solvency ratio.

'It (the transaction) seems unfair to existing shareholders even though it doesn't violate listing rules,' said Ricky Tam Siu-hing, the chairman of the Hong Kong Institute of Investors. 'This kind of transaction is very common among firms that also issue A shares. But I don't think it reflects well on Ping An when it comes to corporate governance.'

Analysts said it was not clear what the arrangement of Cheng's short positions were and whether he attempted to lock in gains using derivatives.

A spokeswoman at New World declined to comment on the transaction but said Cheng bought the shares because he was 'optimistic about the outlook of Ping An'.

Ping An yesterday closed 0.94 per cent lower at HK$73.60, raising its week's loss to 9.9 per cent.