Ping An A-shares trade at rare discount as China finance hit
SHANGHAI: Concern that China will further free up bank deposit rates is prompting investors to dump financial stocks across the mainland, with insurers, including Ping An Insurance (Group) Co, becoming collateral damage.
Ping An’s yuan-denominated shares are now trading at a discount to those in Hong Kong, where price moves are driven more by global sentiment than China policy. With less than six weeks to go before A-shares are included in MSCI indexes, investors are likely to focus on this discrepancy, which makes the insurer the only dual-listed financial stock to seem relatively cheap.
“The direction of that trend is likely to hinge on risk appetite of Hong Kong and global stocks in the near term,” said Bloomberg Intelligence analyst Steven Lam. “Ping An’s insurance operations are still sound and have a market-leading position. The potential spinoff of its technology-based units should continue to support valuations.”
Shares of Ping An fell 0.7% in Shanghai yesterday and were down 0.4% in Hong Kong.
Analysts forecast a potential 12-month return of 36% for Ping An’s A-shares, compared with a 13% upside for bigger rival China Life Insurance Co and 30% for China Pacific Insurance Group Co. Ping An’s A-shares are trading at 12 times its forecast 2018 price-toearnings, compared with 17 times at China Life and 15 times at China Pacific.
Ping An remains undervalued as its core insurance business is still “cheap” relative to its rapid growth, president Alex Ren said last month. Moreover, it’s “not right” to still apply a discount on its integrated financial business model when valuing the conglomerate that spans insurance, banking, and asset management, he said. Ping An has in recent years spent big on technology to make its insurance, banking and asset management businesses more competitive, and has started selling everything from online banking platforms to facial recognition systems to other financial firms in China and around the world. — Bloomberg