The cost of ‘Oops’: Misplaced article on regulator’s website sends ZhongAn shares reeling

ZhongAn plunged after the Hainan branch of the China Insurance Regulatory Commission posted an opinion piece on its website, misleading readers into thinking it was a regulatory notice. The article was later removed.

PUBLISHED : Thursday, 26 October, 2017, 9:47pm
UPDATED : Friday, 27 October, 2017, 9:23am

ZhongAn Online Property & Casualty Insurance fell as much as 7 per cent on Thursday in Hong Kong, dragged down by an article warning of potential risks in the insurer’s business model that appeared temporarily on the website of a branch of the nation’s top insurance regulator. The article was removed from the website.

Shares of China’s first online insurer closed at HK$76.85 in Hong Kong, down 4.7 per cent from its previous close. Thursday’s drop, reflecting the fourth straight session of losses, occurred against a weaker trading session as the Hang Seng Index ended 0.36 per cent lower at 28,202.38.

The Hainan bureau of the China Insurance Regulatory Commission, posted an article on its website on Thursday warning of potential risks in ZhongAn’s business model, saying the online insurer allows other insurance agencies to use its website to sell products, blurring the boundaries between online and offline insurance business.

However, the article was withdrawn from the website later in the day. A bureau official told the South China Morning Post that the article was merely an opinion piece open to debate and was mistakenly posted on the regulator’s website and misled readers into thinking it was an official, regulatory notice.

Still, investors in Hong Kong were unnerved.

“The stock plunge today was mainly triggered by the regulatory notice from CIRC Hainan Bureau,” said Louis Wong Wai Kit, director for Phillip Securities and Phillip Capital Management.

He noted the company’s shares had suffered losses in the past few sessions because they had already risen to quite a high level.

“Investors want to cash out and prepare for the upcoming initial public offering of China Literature, a unit of Tencent. The closely-watched listing, which could raise as much as HK$8.3 billion (US$1.1 billion), is drawing liquidity away from the market,” he added.

China Literature aims to offer 151.37 million shares globally at a maximum price of HK$55 each. It is expected to debut on the main board of the Hong Kong stock exchange on November 8, according to the prospectus seen by the Post.

Guo Zhenhua, head of the insurance department at Shanghai University of International Business and Economics, said internet insurance is expected to keep growing.

ZhongAn priced its listing at the top of an indicated range to raise HK$11.5 billion in Hong Kong’s biggest-ever fintech share sale. The stock soared nearly 60 per cent in the first week of trading from its debut price of HK$59.7 per share on September 28.

ZhongAn’s largest shareholder is Ant Financial, an affiliate of Alibaba Group Holding, which owns the South China Morning Post.