Ping An A-shares trade at rare dis­count as China fi­nance hit

The Star Malaysia - StarBiz - - Foreign News -

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

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