UPDATE 2-China Pacific, Want Want kick off HK share sales

(For an expanded IPO diary, click <HK/IPOMENU>) (Adds details, background, quote)

By Tony Munroe and Kennix Chim

HONG KONG, March 3 (Reuters) - Hong Kong's revived IPO market gained momentum on Monday as China Pacific Insurance (601601.SS) began pre-marketing a share sale to raise roughly $3.9 billion while snack maker Want Want China Holdings kicked off a roadshow for its $1.43 billion deal.

China Pacific Insurance, the country's third-largest life underwriter, plans to sell 783 million shares in Hong Kong, or 9.2 percent of its enlarged share capital, sources familiar with the deal said.

An overallotment option on the long-expected IPO would lift the size of the deal to about 900 million shares.

IPOs are returning to Hong Kong after the market ground to a halt at the start of this year, when several deals were postponed or cancelled.

Hong Kong ranked third among global IPO markets last year, behind the Shanghai and London boards, with 79 deals raising $37.75 billion, according to Thomson Financial.

Investors, however, are expected to be far more selective than they were during the bullish markets of the past two years.

China Pacific's Hong Kong IPO price will be based on the stock's Shanghai price, which at current levels would put it at a premium to larger rivals China Life Insurance (2628.HK) and Ping An Insurance (2318.HK) after sell-downs of both.

"The price is not going to be very attractive, especially compared with China Life and also Ping An Insurance after the recent plunge of the share price, so the response may be a little bit cautious," said Steve Leung, director at UOB Kay Hian Holdings. "Also, the size of this particular issue is very big."

Last week, China Railway Construction Corp began marketing the Hong Kong portion of a dual listing set to raise $5.4 billion -- a deal that is proving popular given heavy infrastructure spending in China.

In another IPO, Chinese oil rig manufacturer Honghua Group on Friday raised $409 million after pricing its shares in the middle of its range. China Evergrande Real Estate, which delayed its IPO in January, is looking to raise $1.5 billion in Hong Kong.

Want Want on Monday began taking orders for its IPO worth up to $1.43 billion ahead of a listing scheduled for March 25, according to a term sheet obtained by Reuters. BNP Paribas (BNPP.PA), Goldman Sachs (GS.N) and UBS are handling the deal.

So-called cornerstone investors have pledged to take up $167 million worth of Want Want's IPO. The eight include Taiwan's Uni-President Enterprises (1216.TW) and its Hong Kong-listed mainland China affiliate Uni-President China Holdings (0220.HK), which are buying a combined $50 million of shares.

Want Want is selling about 2.7 billion shares, not including an overallotment option, at HK$3.00 to HK$4.10 each, or 20.3 to 27.7 times forecast 2008 earnings, the term sheet said.

By comparison, noodle and beverage maker Uni-President China trades at 27 times forecast 2008 profits.

PREMIUM PRICING

China Pacific's Shanghai shares rose 3.7 percent to 36.51 yuan on Monday. The stock is trading 22 percent above its 30 yuan December IPO price in Shanghai, but below a peak of 51.97 yuan.

China International Capital Corp, Credit Suisse (CSGN.VX) and UBS (UBSN.VX) (UBS.N) are handling the China Pacific offering. Investor education was scheduled to run to March 14; No further listing timetable was immediately available.

Shareholders in China Pacific, which raised $4.22 billion in its Shanghai IPO, include buyout giant Carlyle Group [CYL.UL] and a unit of U.S. insurer Prudential Financial (PRU.N). The two paid just 4.27 yuan apiece in May for a combined 1.33 billion shares, and have pledged to hold those stakes for at least three years.

China's two other big listed life underwriters, China Life (601628.SS) and Ping An (601318.SS) had been investor favourites until the mainland stock market sell-off of recent months.

Ping An's Hong Kong shares have lost more than half their value since October amid investor worry over plans to raise more than $17 billion in new equity, and now trade at about 25 times forecast earnings. China Life also trades well below its all-time high, at 22 times forecast profit.

By comparison, China Pacific's Shanghai shares trade at about 42 times forecast profits.

China Pacific held about 10.2 percent of the mainland life insurance market last year, and 11.2 percent of the property and casualty sector, where it is the No. 2 player. It had a combined customer base of 36.1 million as of the first half of 2007.

China Pacific's premium split between life insurance and property and casualty insurance nearly matches the roughly 70/30 split for the industry as a whole. The company said life premiums grew by 34 percent last year, compared with 6.9 percent for China Life and 14.8 percent for Ping An, according to CIRC figures.

Total insurance premiums in China grew at an average yearly rate of 21.7 percent between 2001 and 2006, according to the China Insurance Regulatory Commission (CIRC). ($1=HK$7.8=7.1083) (Editing by Anne Marie Roantree and Lincoln Feast)