Chinese Insurer PICC Surges on Hong Kong Trading Debut

Shares in the state-owned People's Insurance Company (Group) of China (PICC) have gained on its trading debut on the Hong Kong stock exchange, as investors were attracted by the company's low valuation and growth potential.

From the initial public offering (IPO) price of HK$3.48 (28 pence) the shares rose as much as 7.75 percent to a high of HK$3.75 (30 pence). They were trading at HK$3.74 as at 5.41am, in a volume of more than 1.1 billion.

Earlier, the company raised HK$24bn (£1.9bn) from its IPO to sell 6.9 billion shares, the biggest IPO deal in Hong Kong in two years. It marketed the deal in a range of HK$3.42-HK$4.03 (27 pence-32pence).

Several individual investors looking to buy shares in the IPO were disappointed as the offering was 17.5 times oversubscribed. As a result, they were expected to scoop up the shares on its debut.

The pricing of the IPO near the lower end of a marketed range valued the insurer at 0.8 times to 1.5 times of the inherent value in the first half of 2012.

"The company has priced the stock at a relatively low level, leaving the IPO investors some room" to reap gains, Bloomberg News quoted Core Pacific-Yamaichi analyst Olive Xia as saying. "PICC Group also has a good chance in life insurance going forward."

The company's gain on its trading debut was despite the tough market conditions in Hong Kong, primarily resulting from the slowdown in China. New listings in the city state are down more than 60 percent in 2012, making it the worst year since the global financial crisis in 2008, according to a Reuters report.

Due to lower demand, certain companies looking to list their shares have delayed their plans or lowered the deal sizes.

PICC was founded in 1949. The nationwide insurer offering property, casualty, life and health insurance products has 2.42 million institutional clients and about 130 million individual customers.

In China, life and non-life premiums have recorded 22.1 percent and 24.8 percent growth, respectively, between 2006 and 2011, according to official data. Developing countries' life insurance premiums and non-life insurance premiums are expected to grow 8 percent and 13 percent respectively in 2013, according to insurance giant Swiss Re.