Ping An shrugs off slump to soar 38pc in Shanghai debut
40pc premium in insurer's A shares to H shares shows mainland's lack of integration with global markets
Ping An Insurance, the mainland's second-largest insurer, shrugged off a market slump and rose 38.43 per cent on its Shanghai trading debut yesterday to close at 46.79 yuan.
The gain resulted in an almost 40 per cent premium of its A shares to its Hong Kong closing price of HK$34.30.
The firm raised 38.87 billion yuan in the world's largest initial public offering by an insurer.
Despite the sharp rise, Ping An's debut was short of the 106 per cent surge in the January debut of its larger rival, China Life Insurance, partly due to market volatility.
The Shanghai Composite Index dropped 2.9 per cent to 2,797.19 points yesterday.
Ping An's Hong Kong-listed H shares fell 3.24 per cent yesterday to close only slightly higher than its A-share IPO price of 33.80 yuan in a timely reminder of the mainland's lack of integration with global markets.
Analysts have partly blamed the 8.8 per cent crash in the Shanghai market on Tuesday, the largest daily fall in a decade, for a global market dip this week.
But mainland stocks remain sheltered from global capital flows and large valuation gaps for companies listed simultaneously in the country and abroad are common because Beijing still restricts foreign access to its capital markets and operates a closed capital account and partially convertible currency.
'It is the same company so there is no reason why it shouldn't trade at the same price in both markets,' Nomura analyst Karen Chan said. 'The reason it is so much higher in Shanghai has probably to do with the lack of liquidity because there is a limited number of freely tradable shares and a huge retail demand.'
About 345 million of Ping An's new shares were sold to strategic investors who are subject to a one-year lock-up period, while a further 230 million shares were allotted to institutional investors subject to a three-month lock-up period.
As it provides both life and non-life insurance products, Ping An faces risks related to life insurance policies sold in the late 1990s, which offered very high guaranteed returns at a time when interest rates were more than five times their current levels.
In the prevailing low-interest-rate environment, many life insurers are unable to earn sufficient returns to cover these legacy commitments although even publicly listed mainland firms refuse to reveal the exact scope of their liabilities.
'The negative spread burdens are being reduced by regulatory improvements that provide insurers with greater investment options,' Moody's Investors Service insurance analyst Jeffrey Liew said.
The government has been relaxing investment curbs on insurers in the past 11/2 years, allowing riskier investments and more integration between banking, insurance, securities and other financial services.
