Ping An jumps after Fortis deal scrapped

By Parvathy Ullatil

HONG KONG (Reuters) - Shares in Ping An Insurance (2318.HK) jumped by nearly a fifth on Thursday after a $3 billion deal to buy half of Fortis' (FOR.BR) asset management arm was scrapped, but analysts say the move may dent the firm's ambition to become a full-service financial giant.

Ping An benefits in the short term by having a large chunk of capital freed up, but longer-term, Asia's No.2 insurer by market value would have to cast its net wider to find a stronger partner in asset management.

Ping An (601318.SS) stock surged more than 18 percent after a brief morning suspension, marking at that point its biggest single-day percentage gain ever. It ended up 13.8 percent, its third-largest rise in a single trading session.

The stock did not trade on Wednesday when Hong Kong's market was closed for a holiday. Its shares in Shanghai did not trade on Thursday, because mainland Chinese markets were closed this week for a national holiday.

"We believe if the deal were pulled, it is not necessarily bad news for Ping An given the overwhelming negative sentiment associated with Fortis," JP Morgan's Michael Chan said.

"Undoubtedly, this is a temporary setback to the overall "three-pillar" strategy of Ping An to develop itself into a financial conglomerate, but we expect management will continue to look out for potential opportunities in banking and asset management businesses."

BATTERED BY FORTIS

Merrill Lynch said investors had feared Ping An would have had to write off a portion of the stake it planned previously to buy in Fortis' funds unit.

The Belgian, Dutch and Luxembourg governments this week agreed to inject 11.2 billion euros ($16.4 billion) into banking and insurance company Fortis (FOR.AS), which will sell the parts of Dutch lender ABN AMRO it bought last year.

On Wednesday, partially nationalized Fortis said it had scrapped a deal to sell half its asset management arm to Ping An.

"The stock has been battered by the developments at Fortis over the week. This news about Ping An dropping at least a part of its connection to Fortis has come as a relief," said Peter Pak, vice president with BOCI Research.

Ping An's shares have slid 40 percent so far this year, underperforming bigger rival China Life's (2628.HK) (601628.SS) 27 percent fall. It now trades at 18 times forward earnings, cheaper than China Life's 32 and Cathay Financial Holdings' (2882.TW) 31, according to Reuters Estimates.

"In light of the current market environment and condition, not all the conditions precedent to completion (of the deal) can be satisfied," Ping An explained in a statement.

For a full statement, please click here

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(Additional reporting and writing by Edwin Chan; Editing by Ian Geoghegan)