PICC Leads Sizzling Chinese Companies' IPO
By Paul Denlinger
PICC Property and Casualty, China's leading property and insurance insurer debuted on the Hong Kong Stock Exchange Thursday, soaring 50 percent. The H share opened at HK$2.425, hit an intraday high of $2.725, and closed at $2.70. Buying was led by institutional investors and retail investors who want to grab a piece of China's growing insurance sector. About 1.63 billion shares worth $4.22 billion were traded, accounting for 21 percent of the exchange's total turnover for the day.
The HK$5.4 billion issue drew $73.31 billion in demand, making it the most oversubscribed IPO in Hong Kong this year. It is also the largest flotation in Hong Kong this year.
In October, AIG purchased a 9.9 percent stake in PICC, and was positioned as a strategic investor. For AIG, this has brought the company a HK$956.23 million paper profit on its first day of trading. After AIG made its investment, many other traders felt better about making an investment in the company.
PICC Holding's chairman, Tang Yunxiang, parent company of PICC Property and Casualty, commented that he would like the government to ease restrictions on the insurance industry so that it can operate in multiple insurance fields. China's 1995 insurance law separated it into property, casualty, life and re-insurance divisions, putting it in alignment with international practice.
Tang said that the company would like to become a universal financial services player. Currently, this is not allowed.
The next major company in the IPO pipeline is China Yangtze Power, which is already 70 times oversubscribed, attracting more than 385 billion yuan worth of investment from institutional investors. The retail portion of the A-share offering is in the amount of 10 billion yuan. The IPO has Citic Securities as the lead underwriter, and UBS and Deutsche Bank as strategic investors under the QFII (qualified foreign institutional investor) program.
This year, China has suffered from an electricity shortage.
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China Business Strategy , a strategic planning consultancy, has helped companies build more than US$3 billion of market capitalization in the China market since 1998.
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