Mainland insurers fell in Hong Kong and Shanghai yesterday, led by Ping An Insurance and China Pacific Insurance, as investors rushed to cash out from a sector that was seen as overbought in the recent rally.
The selldown was triggered by US private-equity firm Carlyle's decision to pull out of China Pacific Insurance, the nation's No 3 insurer, on Monday. After rallying more than 40 per cent in the past year, the insurer yesterday fell 2.58 per cent to close at HK$30.20.
Analysts said Carlyle's exit had removed the uncertainty that had been weighing on the stock.
Citi analysts, who had set a HK$36 target price for the stock, maintained their "buy" rating even after Carlyle's sell-off. They said the insurer would enjoy a "steady and likely better than peers' net book value growth and sector-leading solvency margin".
Ping An was also in the spotlight yesterday after the South China Morning Post reported the China Development Bank was reconsidering its decision to back a Thai conglomerate's US$9.4 billion bid to buy HSBC's stake in the nation's No 2 insurer.
Ping An fell 4.01 per cent to HK$68.15, on a day the Hang Seng Index lost 0.94 per cent. In Shanghai, Ping An dropped 3.7 per cent to 45.46 yuan (HK$56.60). HSBC fell 0.36 per cent to HK$82.75.
Fund managers are expecting more falls in the near term for mainland insurers, given the relatively expensive valuation and less attractive fundamentals. All major insurers are due to report full-year earnings in March.
"The premium growth story is not quite convincing for Chinese insurers as the nation's banks have put a lot of their deposits in wealth management products instead of insurance products," said Agnes Deng, the head of Hong Kong China equities at Baring Asset Management.
The insurers have been the leading outperformers on speculation that a bull run on the mainland would benefit their heavy investment in the A shares.
The five leading insurers have rallied 17 per cent over the past month, compared with a 5 per cent gain in the Hang Seng Index. The price-book ratio for the five is 2.9, against 1.6 for the index.