* PICC's 7 pct gain outperforms benchmark index drop
* Retail investor demand totalled 17.5 times number of
* PICC surge unlikely to revive Hong Kong IPO markets
By Elzio Barreto and Denny Thomas
HONG KONG, Dec 7 Shares in Chinese state-owned
insurer PICC Group surged nearly 7 percent in its Hong Kong
trading debut on Friday, a rare bright spot in an otherwise
dismal year for initial public offerings in the city and most
other big regional markets.
PICC's strong start is unlikely to kick-start the
Hong Kong IPO market, which is headed for its worst fund raising
year since the onset of the global financial crisis in 2008,
after being the world's IPO capital in 2009 and 2010.
"You have to judge the success of the transaction over the
next few days and weeks, rather than just today," said Philippe
Espinasse, a former investment banker with Nomura and UBS in
Hong Kong and author of 'IPO: A Global Guide'.
"I'm a bit sceptical (about a surge in IPOs). It'll take
more than one deal for the market to fully reopen," he added.
People's Insurance Company (Group) of China, as the company
is widely known, is among the last of the big state-owned
companies to go public.
That process kicked off in the 1990s, when large oil
companies, banks and insurers began to tap public markets as
China started to liberalise its vast and underdeveloped economy.
Conglomerate CITIC Group, Postal Bank of China and China
Minmetals Corporation Group are among the remaining large
state-owned companies expected to list in the coming years,
bankers say. For years, the IPOs of Chinese state-owned
enterprises in Hong Kong was the main fee earner for global
PICC jumped as much as 8 percent earlier in the session as
retail investors who missed out on shares in its $3.1 billion
IPO, the largest in Hong Kong in two years, scrambled on board.
Only 7.5 percent of the IPO was open for retail investors,
while about 58 percent of the deal was covered by so-called
cornerstone investors, including bailed-out U.S. insurer
American International Group, who have committed to hold
their shares for at least six months.
That allocation resulted in retail investors bidding for
17.5 times more than the number of shares offered, the company
said, leaving plenty of individual investors looking to scoop up
shares on Friday.
Founded in 1949, PICC is China's first nationwide insurer,
with 2.42 million institutional clients and about 130 million
individual customers, exceeding the entire population of Japan.
Investors buying into PICC shares are betting on a continued
rise in China's insurance market, the world's sixth largest,
where life and non-life premiums have recorded 22.1 percent and
24.8 percent growth respectively between 2006 and 2011,
according to figures from the country's insurance regulator.
Swiss Re forecasts China life insurance premiums to grow 8
percent and non-life insurance premiums to expand 13 percent in
2013, compared with a low single digit forecast for developed
China is also one of the most underdeveloped life insurance
markets in the world, with a penetration ratio of just 1.8
percent at the end of 2011, compared with 8.8 percent in Japan
and 3.6 percent in the United States, Swiss Re said.
"The life part of the business is growing fast and will
become a bigger part of the group going forward," Sally Yim, a
senior credit officer at Moody's Investors Service in Hong Kong.
"And the company will require more capital to meet the rapid
growth in life insurance."
Given the tough markets, PICC left nothing to chance to get
the offer over the line.
As well as hiring a record 17 banks and securing $1.82
billion in cornerstone commitments, the company also leaned on
the auspicious number eight, which is thought to be lucky in
China and across much of the region.
Some glimpses of that emerged when the company set the yuan
price range of the offer that ended in eight. Last Thursday,
PICC held its first media photo opportunity for the IPO, timing
the event for 12:58 p.m. to 1:58 p.m.
The following day PICC called the media conference between
4:48 pm to 5:58 pm and then the IPO itself was priced at
HK$3.48, again emphasizing the importance of the number.
"It's solely coincidence," PICC's Wu said, after gifting
Hong Kong exchange officials a golden elephant and a golden
bull, both symbols of good luck and prosperity.
Despite the late boost to deal volumes from PICC, new
listings in Hong Kong are down 63 percent in 2012, according to
Thomson Reuters data.
PICC priced the IPO shares at HK$3.48 each, near the bottom
of its marketing range. On Friday the shares closed at HK$3.72,
up 6.9 percent, while the benchmark Hang Seng index lost
"The prices we saw today reflect people's confidence and
expectations in us," PICC Group's Chairman Wu Yan said during a
ceremony at the Hong Kong stock exchange. "Everyone has the same
confidence in us as we have in ourselves."
The gains were a rare success in a difficult capital markets
environment in Hong Kong, where some IPO hopefuls have delayed
offers or sharply scaled back fund raising plans.
PICC was the top Hong Kong IPO since AIA Group Ltd's
$20.5 billion offer in 2010 and No. 2 IPO in
Asia-Pacific ex-Japan's in 2012 after Malaysian plantation
company Felda Global Ventures Holdings $3.3 billion
Across the region, only the Southeast Asian markets of
Malaysia, Philippines and Thailand have seen a surge in IPO
issuance, with volumes down more than 60 percent in China and
South Korea and 40 percent in Singapore.
China International Capital Corp (CICC), Credit Suisse Group
AG, Goldman Sachs Group Inc and HSBC Holdings
Plc acted as sponsors of the IPO.