New China Life Insurance Co. jumped in its Shanghai trading debut after offering shares at a lower valuation than its biggest rival and as Asian equity markets rebounded from three days of losses.
Shares in the nation’s third-largest life insurer surged 14 percent from its initial public offering price to close at 26.44 yuan. The stock rose 2.7 percent to HK$26.40 in Hong Kong, following a 9.8 percent slump in its debut in the city yesterday. The Beijing-based insurer raised $1.9 billion this month after pricing the shares near the bottom of a marketed range.
New China Life yesterday had the worst debut among Hong Kong IPOs of at least $1 billion since June, according to data compiled by Bloomberg. The MSCI Asia Pacific Index advanced 0.8 percent today as better-than-expected U.S. data signaled the world’s biggest economy is strengthening.
“New China Life’s IPO price values it at a level cheaper than China Life, which has the most similar business structure” among the nation’s major insurers, said Qiu Peng, a Shanghai-based investment manager at Western Securities Co., referring to the companies’ focus on life insurance. Trading data show that “some institutional investors are buying, as they probably believe that insurers have been oversold.”
New China Life set its Shanghai IPO price at 23.25 yuan, near the bottom of 23 yuan to 28 yuan range to investors, offering the stock at about 1.2 times estimated 2011 embedded value, according to Qiu. Its biggest rival China Life Insurance Co. trades at about 1.5 times, he said.
China Life has fallen 21 percent in Shanghai this year while Ping An Insurance (Group) Co., the nation’s second-largest insurer, tumbled 36 percent, after premiums growth slowed as the nation’s economic expansion cooled.
The benchmark Shanghai Composite Index climbed 2 percent today after six days of declines, on speculation the government will loosen credit curbs as decelerating growth in exports threaten to deepen the economic slowdown.
New China Life is raising more equity after its expansion in a market that has grown an average 30 percent a year during the past three decades brought its solvency ratio, a gauge of its ability to settle claims, below regulatory requirements. It sold 358.4 million shares at HK$28.50 each in Hong Kong and 158.5 million shares at 23.25 yuan apiece in Shanghai.
Companies including Haitong Securities Co. canceled or reduced first-time offerings in the past week as global economic concerns sapped demand for equity.