Investors who bought Chinese insurance company stocks recently needed insurance Wednesday as a free-fall in stocks of China Life battered the sector. But one brokerage is saying it’s time to buy low on China Life.
The insurance giant announced a drop of 28% in first half 2011 profits, driving its stock in Hong Kong down 11.5%. Ping An (2318 in Hong Kong), another major insurer, reported a sale of a block of trade of its stock worth about US$1 billion, further depressing the sector.
Executives at China Life (2628) recently acknowledged to analysts at BOCOM International that it had been having serious problems, the brokerage said in its market report Wednesday. Specifically, the quality of its agents has been low, sales of policies through banks are lagging and its product mix has not maximized profits.
But BOCOM said the company has already started to replace non-performing agents and improve sales in banks by training staff and launching new products. It will also focus on its more profitable 10-year regular life product in the second half of 2011.
A recently approved re-financing plan will boost China Life’s sagging solvency adequacy to above 200%, enough to support development for the next two to three years, BOCOM reported. With Wednesday’s 11% plunge China Life is trading far below its average level since listing, making it a long-term buy in the eyes of BOCOM International. End
DAILY FIX — China Life Insuance Profits Plunge
Hong Kong Blue Chips: -409, -2.1%, to 19,467, 08-24-11, Hang Seng Index
Chinese Stocks in Hong Kong: -323, -3.1% to 10,256, 08-24-11, HSCE Index
Shanghai Stocks: -0.5%, 2,541, 08-24-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: +15.3 to 393.0, 08-23-2011, Bank of New York Mellon, ADR Index-China
Insight: The Hong Kong market fell sharply after insurance giant China Life (2628) reported a large decline in profits and Moody’s downgraded Japan’s debt. One bright spot was China Telecom (0728) which reported earnings in line with market expecations and rose 4.1%. The company was also helped by speculation it would launch the iPhone soon. KGI Research
Quotable: “We expect that HSI will keep see-sawing with range bounce from 19,500 to 20,200.” Core Pacific Yamaichi. 8-23-2011
Chinese Companies to Watch: chinese property sector. “Under the current credit tightening environment and together with various strict policies in place, we remain cautious on developers with high net gearing which may have less flexibility to deal with the current harsh market conditions. This group includes
Greentown China (3900 HK, Underperform) and R&F Properties (2777 HK, Underperform).” CCB International. 8-23-2011
Brokerages and analysts cited have disclaimers on their websites emphasizing their statements are for information only. They do not endorse my blog, and I don’t endorse them.
For a list of Chinese companies sold in the U.S. and information on each company go to http://www.adrbnymellon.com/dr_country_profile.jsp?country=CN