Ping An likely to price A shares at high end
Move indicates market is turning more rational, say analysts
Ping An Insurance (Group), the country's second-largest life insurer, will probably price its yuan-denominated A shares at about 33 yuan, the high end of the indicative range, according to a source.
Shenzhen-based Ping An will raise as much as 38.9 billion yuan by selling 1.15 billion A shares, based on the range between 31.80 yuan and 33.80 yuan, according to its statement filed to the Shanghai stock exchange. The price range is lower than expected, as some analysts had suggested that the price might go as high as 50 yuan.
'This is a sign that the A-share market has turned more rational,' BNP Paribas analyst Dorris Chen said. 'Institutional investors don't expect retail investors to pour money into the market on the first day, so they no longer believe A shares deserve a premium over their H-share counterparts.
'They want to guarantee their returns by quoting A shares at a discount to H shares.'
At the top end of the price range, Ping An's A shares would be about 15 per cent below the Hong Kong shares, which closed 1.98 per cent higher yesterday at HK$38.55.
The stock, which has more than doubled over the past 12 months, is down 23.05 per cent from its historic intraday high of HK$50.10 reached early last month.
Ping An's A-share listing coincides with volatility in the mainland market on concerns that the government may launch measures to curb it from rising too rapidly.
'The underwriters may be worried about the market performance of the stock, so they set [Ping An Insurance's A shares] at a lower than expected range,' said Joe Wong, an analyst with UOB Kay Hian.
Mr Wong said although Ping An's H shares might already be expensive after the recent rally, its A shares still had room to gain.
China Life Insurance, the country's biggest life insurer, priced its A shares at 18.88 yuan each in December, an almost 20 per cent discount to the H shares. Its share price has fallen 15 per cent this year after gaining threefold over the past 12 months.
Institutional investors will start buying Ping An's A shares today and retail investors can place orders on Monday.
The final price will be set on Tuesday, and the A shares will begin trading around March 1 on the Shanghai Stock Exchange.
