PICC makes strong debut on HKEx
Mainland's largest non-life insurer closes 6.9pc higher than offer price, helped by the easing of restrictions on investment in commercial banks
People's Insurance Co (Group) of China, the mainland's largest non-life insurer, raised investors' eyebrows on its debut in Hong Kong yesterday, jumping as much as 8.05 per cent at one point.
PICC, which had priced its shares near the bottom of the indicative range, closed at HK$3.72 - 6.9 per cent higher than its offer price of HK$3.48. The Hang Seng Index fell 0.26 per cent in heavy trade.
"The solid debut of PICC was driven by a wave of fresh buying momentum after the China Insurance Regulatory Commission eased the restrictions on insurance companies' investment in commercial banks, offering more flexibility to insurers to diversify their risks and revenue streams," an insurance analyst at a US investment bank said after the market closed.
The commission said on Wednesday mainland insurers would be allowed to broaden their investment positions in commercial banks. That followed a decision in September to allow insurers to outsource some of their investment operations to improve their investment returns.
The analyst said the valuation of PICC's shares was "not attractive" because the growth of premiums in its flagship non-life business had moderated, with signs of market share being lost to smaller rivals.
In the life insurance sector, large players such as China Life Insurance, the country's biggest life insurer, also face challenges from smaller, swiftly moving competitors.
"The revenue growth driver for the No 1 non-life insurer should be its life business, while profit should rely on synergy among existing operations, which remains doubtful at this juncture," the analyst said.