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Ping An Insurance (Group) Co. (2318) fell for a second day in Hong Kong trading after a media report that Chinese regulators will reject Charoen Pokphand Group Co.’s proposed purchase of a 15.6 percent stake in the insurer.
China’s second-largest insurer dropped as much as 2.3 percent and traded 1.4 percent lower at HK$67.20 as of 11 a.m. local time. The China Insurance Regulatory Commission is set to reject the $9.4 billion purchase from HSBC Holding Plc on concerns whether the Thai company is the real buyer, the South China Morning Post reported today, citing unidentified people.
“It would be in CP Group’s interest to find a way to fund the deal, and prove it is indeed the real buyer of the Ping An stake, not acting on behalf of other parties,” Deutsche Bank AG’s Hong Kong-based analyst Esther Chwei wrote in a report yesterday. “While the stake sale overhang may weigh on Ping An’s share price in the near term, we believe this has limited impact on Ping An’s fundamentals.”
HSBC said Dec. 5 it agreed to sell its stake in Ping An to Thai billionaire Dhanin Chearavanont’s Charoen Pokphand as Europe’s biggest bank by market value moves to revive profit and boost capital. The Shenzhen-based insurer tumbled 4 percent, the most in more than five months, in Hong Kong yesterday after a Caixin Online report that China Development Bank Corp. halted loans for the acquisition.
Charoen Pokphand should “do more to explain where and how it will get the money” for the purchase, especially if the government-owned CDB isn’t providing the funding, the Post said, citing one of the people. The deadline for the CIRC’s approval is Feb. 1, the Post said.
Ping An’s Shenzhen-based spokesman Sheng Ruisheng didn’t answer a call to his mobile phone, while calls to Charoen Pokphand’s corporate communications department went unanswered before office hours. Gareth Hewett, a spokesman for HSBC in Hong Kong, declined to comment.
Charoen Pokphand’s purchase will take place in two phases, with the first to have been completed by Dec. 7, while CDB will finance part of the deal through its Hong Kong branch, according to HSBC.
Caixin reported last month that about two-thirds of the first payment of the deal came from Chinese investors and that Ping An’s management may have helped finance the Chinese backers, which both the insurer and Charoen Pokphand denied at the time.
Under CIRC rules, any purchase of a stake in an insurance company in China has to be financed by internal funds and external funds or financing are not allowed, according to the Deutsche Bank report. As such, CP Group would not be able to use CDB loans to finance their purchase of Ping An shares and hence, the halting of CDB loan seems to be a natural outcome, Chwei wrote in the report.
The deal is “in normal approval process,” Ping An’s Sheng said in an e-mailed statement yesterday, without elaborating, in response to an inquiry about the story on CDB’s withdrawal of funding. Sheng earlier called Caixin’s report last month “irresponsible.”
Bigger rival China Life Insurance Co. (2628) rose 0.8 percent in Hong Kong, while the city’s benchmark Hang Seng Index added 0.4 percent. China Pacific Insurance (Group) Co. gained 0.7 percent, while New China Life Insurance Co. slipped 0.2 percent.
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