PICC jumps in debut trading, lifted by strong retail demand

PUBLISHED : Friday, 07 December, 2012, 1:20pm
UPDATED : Friday, 07 December, 2012, 5:41pm

PICC Group (1339.HK) rose sharply on its debut on Friday as retail investors flooded in to buy the shares speculating that Hong Kong's biggest initial public offering (IPO) in two years should be a resounding success – particularly with 17 underwriters and an impressive list of big name cornerstone investors.

The share price jumped  6.9 per cent to HK$3.72 as of the mid-day close in Hong Kong, after rising to HK$3.75 earlier in the morning session. The insurer priced its shares at HK$3.48, near the bottom of an indicative price range during the IPO.

Half-day trading value on the stock amounted to as much as HK$3.88 billion, accounting for 10.8 per cent of the Hong Kong market’s total trading volume as of midday on Friday. By midday, total volume on the Hong Kong market stood at HK$35.69 billion.

“We got a great number of orders from retail clients this morning to buy PICC, much bigger than the last few IPO stocks, ” said Jonathan Wang, a trader at Haitong International Securities. “This is the first large-cap, government-backed stock that has debuted in Hong Kong since the new (Beijing) leadership. Everyone believes that it won’t fall.”

Sharon Wong, director of a retail branch at Shenyin Wanguo in Hong Kong, said this could be a favourite retail stock in Hong Kong this year. “This is a jumbo deal and the retail investors just don’t want to miss it,” he said.

The six Hong Kong-listed insurers are trading at an average price-to-embedded value of 1.4 times based on figures from the latest fiscal year. PICC's price-to-embedded value ratio, a common measure for insurance companies, is set at between 1.2 times and 1.6 times in the current fiscal year ending March.

PICC raised HK$24 billion (US$3.1 billion) in Hong Kong’s largest IPO in two years. The new listing is the biggest in Hong Kong since AIA, the Asian life insurance unit of US insurance giant American International Group (AIG), raised US$20.5 billion in 2010.

PICC has drawn strong support from a list of influential cornerstone investors, who subscribed US$1.82 billion worth of shares of the offering. The list includes AIG, China Life Insurance, French reinsurer SCOR and Russian Insurance, a Moscow-based state-owned company. Other investors include such big Chinese state-owned enterprises as State Grid, China's largest power distributor, and Sinomach, China's largest heavy machinery maker.

China International Capital Corp, Goldman Sachs, HSBC and Credit Suisse are the sponsors of the PICC deal, while 14 banks are acting as underwriters.