China Life Rises to 2011 High in Hong Kong as Insurers Surge

Chinese insurers led gains in Hong Kong trading, with China Life Insurance Co. capping a three-year high, amid speculation a stock-market rally will boost earnings.

China Life, the nation’s largest insurer, surged 8.7 percent to HK$30.50 at the close in Hong Kong, its highest level since December 2011. Ping An Insurance (Group) Co., the second biggest, jumped 7.5 percent to HK$79.25. The Hang Seng Chinese Enterprises Index rallied 4 percent, the most in a year, while the Hang Seng Index climbed 1.8 percent.

Today’s surge for insurers comes as Hong Kong’s stock market resumes trading following a two-day holiday, when the Shanghai Composite Index surged 6.2 percent amid speculation the government will further loosen monetary policy to bolster the economy. The People’s Bank of China plans to temporarily waive a requirement for lenders to set aside reserves for some deposits, people with knowledge of the matter said last week.

“Further easing of policy may benefit the investment environment,” boosting investment income for insurers, said Dickie Wong, an executive director of research at Kingston Financial Group in Hong Kong. “I expect a further cut to the reserve-requirement ratio or interest rates, giving a boost to Chinese financial shares. Over the Christmas holiday the A-shares were doing well and Hong Kong is now catching up.”

Equities made up about 8.4 percent of China Life’s investment portfolio in 2013, while it was about 9.8 percent for Ping An, according to data compiled by Bloomberg.

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China Life and Ping An shares are up at least 33 percent since Nov. 21, when the nation’s central bank cut benchmark interest rates for the first time since July 2012. The gains are double the 15 percent advance by the Hang Seng China index during the period. The two insurers rallied at least 4.7 percent in Shanghai today.

Even after today’s surge, China Life shares are 38 percent more expensive in Shanghai, while Ping An’s premium is at 12 percent, making the Hong Kong-traded shares more attractive, according to Wong. Ping An was a top pick for next year, according to six out of nine brokerages surveyed. China Pacific Insurance (Group) Co., which was up 12 percent today, is among top-rated insurers, according to data compiled by Bloomberg.

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