(Bloomberg)
Updated: 2007-01-31 14:34

China's securities regulator Tuesday said it has cleared Ping An Insurance (Group) Co., the nation's second-largest insurer, to sell shares in a Shanghai offering that may raise more than US$4 billion.

Ping An's sale of as many as 1.15 billion new yuan- denominated Class A shares, or a 16 percent stake, would make it the nation's second-largest domestic equity offering, based on the price of the company's Hong Kong-traded stock.

Customers buy insurance at a branch of the Ping An Insurance (Group) Co. in Yichang, Central China's Hubei Province January 30, 2007. China's securities regulator Tuesday said it has cleared Ping An Insurance (Group) Co., the nation's second-largest insurer, to sell shares in a Shanghai offering that may raise more than US$4 billion. [newsphoto]

The government is encouraging financial companies to sell shares in Shanghai and Shenzhen to boost the quality and size of the nation's stock market. Equity fundraising on the two exchanges may overtake Hong Kong this year for the first time since 2001, accounting firm Ernst & Young estimates. 

"Insurers were previously absent from the Chinese mainland stock markets," said Tang Yong, a sales trader for Xiangcai Securities Co. in Shanghai. The public share sale of Ping An and, earlier this year, China Life Insurance Co. will make the mainland capital markets and stock indices more representative of the wider economy, he said.

The Shanghai Composite Index dropped by almost 50 percent between 2001 and 2005. The value of China's gross domestic product almost doubled during that period.

Ping An's shares have jumped 42 percent in the past three months to close at HK$38.35, or about 38.17 yuan. That would equate to a sale of 44.1 billion yuan ($5.6 billion). Still, the stock is likely to price at a discount to the Hong Kong price.

Stock Discount

China Life, the nation's largest life insurer, in December sold 28.3 billion yuan of Class A shares in the first domestic offering by an insurer. The company sold its stock at a discount of more than 20 percent to its Hong Kong-quoted equity. That would equate to a $4 billion sale by Ping An.

The sale would be second only to the 46.6 billion yuan Shanghai share offering by Industrial & Commercial Bank of China Ltd. It would also be the first arranged by Goldman Sachs Group Inc.'s investment banking venture in China.

Ping An hired Citic Securities Co., China Galaxy Securities Co. and Goldman Sachs Gao Hua Securities Co. to arrange the A- share offering.

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