ZhongAn shares soar nearly 60pc since trading debut last week, pumped up by appetite for ‘sexy’ fintech

Analysts expect online insurer to reach new highs as its share supply is limited, but they also warn it’s vulnerable to wild price swings due to growing speculation

PUBLISHED : Friday, 06 October, 2017, 5:41pm
UPDATED : Friday, 06 October, 2017, 11:14pm

Shares in Hong Kong’s biggest ever listed financial technology (fintech) company surged further on Friday, extending their gains since trading started last Wednesday to nearly 60 per cent.

Analysts said investors like the ZhongAn Online Property & Casualty Insurance concept – China’s first purely online insurance platform – but added the stock price will be open to volatility due to a limited supply of shares on the market.

However, the fledgling fintech, which expects to post significant losses for 2017, has already become more expensive than other tech and insurance players and could be vulnerable to wild price swings.

ZhongAn soared as much as 20 per cent on Friday to trade at HK$96.1 (US$12.30), following a 20 per cent jump on Thursday.

China’s ZhongAn Online jumps 15pc in Hong Kong trading debut

It pared those gains in the afternoon, but the shares still ended the day up 17 per cent at HK$93.65. Turnover was HK$5.6 billion, the highest in Hong Kong stock market.

Zhongan’s launch price was HK$59.7 when trading debuted on September 27. The surge has pushed the total market value of the company to above HK$130 billion.

The Hang Seng Index also rose on Friday to the highest intraday level since December 2007, extending a recent rally after the Chinese central bank, the People’s Bank of China (PBOC), announced a targeted reserve requirement ratio cut last weekend to boost lending to small business, and Wall Street continued to hit record highs.

ZhongAn launched in October 2013 and began operating the following month, started out working with Alibaba Group to help address online shoppers’ concerns over erroneous or unwanted buys by underwriting the delivery costs of returned goods.

It was co-founded by Alibaba’s finance affiliate Ant Financial, Tencent and Ping An Insurance and now has 11 core investors.

This is a sexy stock, just like iPhone-related shares, Chinese electric cars, or new economy concepts
Ben Kwong, executive director for KGI Asia

It has been using artificial intelligence and big data analytics in each step of the insurance product chain, from marketing, underwriting, pricing to claims processing, according to the company.

The Financial Times reported that its flight-delay insurance, for instance, can price in weather factors in real time for policies sold just hours before departure time. One of its flagship products remains its shipping return policies, which reimburse the cost of shipping when an online shopper returns a product.

Its meteoric rise has propelled other related stocks, too, including Sinolink Worldwide, which controls a 5 per cent stake in Zhongan. Sinolink Worldwide also soared 4.9 per cent to close at HK$1.51.

More Chinese fintech firms to eye Hong Kong IPOs, says JP Morgan

“Investors have high hopes for the fintech concept,” said Ben Kwong, executive director for KGI Asia. “This is a sexy stock, just like iPhone-related shares, Chinese electric cars, or new economy concepts.”

Besides, ZhongAn has a relatively small amount of free float shares, with less than 10 per cent of its total share capital currently available for trading in Hong Kong.

“With such a limited supply, the stock price can be volatile”, Kwong added, but that short-term they could rise further.

“It has become increasingly speculative. If the price breaches HK$100, you may see greater volatility.”

Yan Chong Chan, director for Hong Kong-based Au Chan Investment, said ZhongAn seemed to have received a lot of buying from overseas investors in the past few days.

He said buying spiked around noon on Wednesday, when many local investors may have chosen to leave early for a traditional Chinese holiday. The Hong Kong market was closed on Thursday for the Mid-Autumn Festival.

The surge also coincided with the recent rally in the broader market, sparked by the PBOC’s rate cut last weekend and record highs on Wall Street.

“But ZhongAn’s price has reached too high a level,” Chan said.

After receiving an IPO oversubscription of nearly 400 times from retail investors, its shares were priced at the upper end of the expected range, raising US$1.5 billion.

For the first six months of the year, ZhongAn posted a net profit loss of 286 million yuan (US$43 million) and is expected to record significant losses for the full year.

Chen Jin, the company’s CEO, said at the listing ceremony that the company is still at an “early development stage” and will continue to increase investments to make it more competitive.