China Life surges in Asia debut
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China Life is the world's largest share offer this year, raising $3 billion.
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China Life's stunning U.S. debut. CNNfn's Stephanie Elam reports.
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HONG KONG, China -- Shares in China's largest life insurer, China Life Insurance, have jumped 24 percent in their Hong Kong debut, almost mirroring a 27 percent first day gain in New York.
The insurer is the world's largest initial public offering (IPO) this year and raised $3 billion on Wall Street amid feverish demand for China stocks.
However its Hong Kong debut on Thursday was marred by a snafu in the allocation of shares to more than 360,000 retail investors.
The error -- contained in a supplement in Hong Kong's major newspapers -- affected between 10,000 to 20,000 investors by mixing up the I.D. numbers of those allotted 2000 shares and 3000 shares.
In scenes absent since the dot.com era, and bolstered by the strong first day showings of other China IPOs this year, thousands of small investors in Hong Kong queued up outside bank branches last week to apply for the shares.
The largest life insurer in the world's most populous nation saw its offering 25 times oversubscribed as investors renewed their craving for IPOs and clamored for a piece of the Chinese economy, which is growing at more than 8 percent a year.
Francis Lun, general manager of Fulbright Securities, told CNN Thursday that there was a "huge appetite" worldwide among investors looking to buy into the Chinese market.
Lun said per capita spending on insurance in China was only one-twentieth of the figure in the United States, showing China Life's "enormous potential for growth".
Shortly after the start of trade on Thursday, China Life's Hong Kong listed shares were trading at HK$4.45 -- a sharp rise on their IPO price of HK$3.59.
In the company's spectacular New York debut, China Life's American Depositary Shares -- each equal to 40 Hong Kong listed shares -- were the most active issue, trading as high as $25.15.
They dipped back to close at $27.72, about 27 percent above the IPO value of $18.68 and equivalent to a Hong Kong price of HK$4.60. (Full story)
State-controlled China Life is the leading life insurer on the mainland with a market share of 45 percent last year, followed by Ping An Insurance with 24 percent.
The company posted pro forma net profit of 4.52 billion yuan ($545.89 million) in 2002. It did not give a profit forecast for this year in its listing application with the U.S. Securities and Exchange Commission.
But CICC wrote in a research note sent to institutional investors last month that it expected China Life's earnings to jump by 19 percent in 2003, and 24 percent in 2004.
China Life sold about 6.47 billion shares, or one quarter of its enlarged share capital, valuing the company at about $12 billion at the issue price of HK$3.59.
China Life plans to use net proceeds from the share sale for general corporate purposes and to strengthen its capital base.
The deal comes after PICC Property and Casualty, China's largest property and casualty insurer, raised HK$6.221 billion ($797 million) in a recent Hong Kong IPO which was priced at 1.24 times its estimated book value.
China Life was formed as a joint stock company in June this year to bundle the healthiest assets together. It took over life policies sold in and after June 1999 from its state-owned parent.
The company had more than 44 million individual and group life insurance policies, annuity contracts and long-term health insurance policies as of June 30. It also offers accident and short-term health insurance.
