Ping An Insurance Shares Drop in Wake of $3.5 Billion Convertible Bond Plan

Dow Jones07-16

By Jiahui Huang

Ping An Insurance's shares fell after the Chinese insurance giant said it would raise US$3.5 billion via an issuance of convertible bonds to fortify its capital position and support new business initiatives.

The insurer's Hong Kong-listed shares fell 5.4% to 34.10 Hong Kong dollars (US$4.37) on Tuesday, making the stock the top decliner among Hang Seng Index constituents. In China trade, Ping An's A-shares closed 3.15% lower, extending 12-month losses to 15%.

Ping An, one of China's largest domestic insurance companies by premium income, said ahead of trading Tuesday that it would issue five-year convertible bonds and use the funds raised to develop its core business and strengthen its capital position, as well as to support new initiatives in healthcare and elderly care. At full conversion of the bonds into shares, they would make up about 3.3% of company's enlarged share capital.

Jefferies analysts said in a note that they would like further clarity on Ping An's use of proceeds, adding that "investors appear somewhat skeptical about the possible dilution and whether the raise heralds some M&A possibility, given [the] company mentioned before it is comfortable with capital position."

Jefferies has a buy rating and a HK$53.00 target price on the Hong Kong-listed shares.

Ping An's fundraising plan comes in the wake of a host of multibillion-dollar convertible bonds by Chinese companies, including Alibaba, JD.com and Lenovo, among others, as the low funding cost of convertible bonds make them increasingly popular for Chinese companies listed in Hong Kong and the U.S. amid high interest rates and overall subdued liquidity in equity markets.

The Chinese insurer's bottom line has been hurt recently by weaker investment returns alongside flagging stock markets in China and Hong Kong. Ping An's first-quarter net profit dropped 4.3% from a year earlier, dragged by lower investment income and weak sector sentiment during the period.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

July 16, 2024 04:11 ET (08:11 GMT)

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Comments

  • Chris Tan
    07-17
    Chris Tan
    Good deal for Ping An for borrowing at low cost. Converting price at premium shows huge rally potential 😃
  • Tigerwong
    07-16
    Tigerwong
    In light of the Chinese environment, raising capital via convertible bond plan is a great strategy as liquidity is foremost in this market.  Such cheap funding do come with a price, which in this case is dilution of the existing shareholders as it expands the share base and also lower the overall book value per share.  But overall this does give the company more flexibility and controls in this crucial period and will probably give the company many potential cheap acquisitions down the road.  
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