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China’s PICC Goes Public in HK Today to Woo Individual Investors

11-26 11:40 Caijing
Higher return on investment, strong performance from cross-selling, as well as lower operating expenses added to interests in the company’s IPO, said an earlier report by Merrill lynch.

The Initial Public Offering (IPO) of People’s Insurance Co. of China Ltd., one of the largest offerings the world has seen this year, kicks off today in HK to woo individual investors.

The company is going to raise at most $4 billion by offering 6.898billion new shares, or 16.7% of the total enlarged share capital at a price range of HKD3.42-HKD4.03.

HK securities traders have put aside as much as HKD45billion in lending to individual investors ahead of the PICC IPO, the largest reserve capital pool seen in years.

However, the institutional tranche, which accounts for 95 per cent of the IPO had been fully sold after it was launched to institutional investors last Thursday, Dow Jones Newswires reported.

Higher return on investment, strong performance from cross-selling, as well as lower operating expenses added to interests in the company’s IPO, said an earlier report by Merrill lynch.

The report said that estimated return of PICC on investment during the 2012-2014 period is around 5.75%, higher that the average 4.6%-5.5% of the industry.

Analysts said with a proper offering price, PICC could be a medium-to-long term value stock given the company’s stronger medium-term income growth than rivaling Chinese insurers.

17 underwriters, including Bank of America Merrill Lynch, Morgan Stanley and UBS AG, have secured 17 cornerstone investors, including AIG, insurers from France, Japan and Russia, as well as its domestic rivals like China Life, which together bought about $1.9billion of its IPO shares.

AIG said it invested $500 million in PICC’s IPO and would be forming a joint venture with the Chinese insurer, in a move to boost its presence in China.

The American insurer also agreed to not sell over 25% of its PICC shares in five years without nods from the Chinese company.

Besides AIG, state-owned China State Grid Corp., the country's largest power company, has taken $300 million worth of shares.

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