A matter of life and death: China's Sunshine Life Insurance takes a stake in a Hong Kong funeral service provider
Mainland market for funeral services expected to grow rapidly as population ages
Beijing-based Sunshine Life Insurance is taking a step into the growing market for funeral services in China with the acquisition of a 7.3 per cent stake in Hong Kong-listed funeral service provider Fu Shou Yuan International Group for an estimated HK$775.6 million.
Sunshine will buy 151.48 million shares from FSG Holdings via a placement at a price of HK$5.12 a share, according to a company filing to the Hong Kong stock exchange on Monday. The shares closed at HK$5.10 on Friday. The share sale represents approximately 7.3 per cent of the issued share capital of the company.
With the investment, Sunshine is betting on the robust growth of China's death care market, as it seeks better investment options in the face of volatile stock markets and a sluggish property sector. The demand for burial and funeral services will soar in the next few years, analysts said, due to China's rapidly ageing population and rising income levels.
"China is facing a soaring number of old people, and the death rates are expected to increase," said Ronald Wan, chief executive of Hong Kong-based Partner Capital.
The number of elderly people above 60 years old was 212 million in 2014, about 15.5 per cent of the total population, according to official statistics. The government has forecast that the number of the elderly over 60 years old will account for over 20 per cent of the total population by 2025.
According to UN estimates, the death rate in China is expected to increase to 9.5 per thousand people in 2023. It stood at 7.2 per thousand in 2014.
In addition, analysts said rising personal incomes may lead to increasing demand for and higher spending on elaborate funerals, given the importance of rituals in traditional Chinese culture.
A report by China International Capital Corp in 2013 estimated that China's death care services industry will be worth 99 billion yuan (US$15 billion) by 2017, growing by a compound annual rate of 17 per cent from 2013 to 2017.
FSG Holdings’ stake in the company will be reduced to 18 per cent, from 25.3 per cent, after the completion of the share sale.
“The board does not expect the disposal and the reduction of shareholding interest of FSG Holdings in the company will have any material adverse impact on the business or operations of the group,” chairman Bai Xiaojiang said in the company statement.
The sale is expected to be completed by late December.
