not vested
AIA: Chinese Can’t Have Enough Hong Kong Insurance; Deutsche Now Sees 25% UpsideBy Shuli Ren
AIA Group (1299.Hong Kong) has advanced 10.8% this year, on the back of strong earnings, but this Asian insurer’s share gain has been capped on concerns that the Chinese government will prevent mainland Chinese from buying Hong Kong insurance products further as a way to stem more capital flight.
We found out yesterday that in August, capital was leaving China again at the fastest pace since January. China’s foreign currency reserves fell $16 billion from July.
According to Deutsche Bank‘s Esther Chwei, tighter border control has not prevented mainland Chinese from buying Hong Kong insurance policies. If anything, they want more.
Chwei wrote:
The key feedback is that recent regulatory actions to curb sales of HK insurance policies to mainland visitors have not dampened demand. In fact, the depreciation trend in the RMB, low deposit rates in China, and the fear that HK insurance may be entirely banned and no longer available for mainlanders, continue to fuel mainland Chinese demand for HK life insurance policies.
Given the relatively small size of the HK market, we believe there is ample room for further growth. It is likely that HK growth could continue to surprise the market on the upside.
We estimate that
~42% of AIA’s 1H16 VNB was driven by mainland Chinese, combining AIA HK (~22%) and AIA China (20%).
Along with better-than-expected Asian equities/currencies performance, we have raised our 2016E/17E EV and VNB forecasts by 1.3%/1.7% and 4.7%/7.1%, respectively. We raise our target price by 11% to HK$63.3/share.
Deutsche’s price target implies 2.1 times their 2017 book. AIA is currently trading at 2 times 2016 book.
Earlier this week, China decided to crack down on high-risk high-yield insurance policies, which could fuel more capital inflow into the Hong Kong market.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... 25-upside/
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