Shares in Chinese Insurer PICC Group Sink After Citic Warns They're Overvalued
Liao Shumin
/SOURCE : yicai
Shares in Chinese Insurer PICC Group Sink After Citic Warns They're Overvalued

(Yicai Global) March 8 -- Shares in state-backed People's Insurance Company Group of China are trading at the daily down limit after China's largest investment bank Citic Securities said the stock was priced at almost twice its worth.

The insurer's mainland-listed shares [SHA:] were down 9.98 percent at CNY11.55 (USD1.72) as of 1.42 p.m., a day after Citic valued the stock at between CNY4.71 and CNY5.38 in a research paper that said the property insurance giant was "greatly overvalued," and hit it with a sell rating for the first time.

On the flip side, Citic said the company's Hong Kong-floated shares [HKG:1339] were undervalued and recommended to buy, but the stock has also fallen 3.01 percent to HKD3.54 (45 US cents).

PICC itself issued risk warning announcements on March 6 and yesterday to ensure investors were paying attention to secondary market risks. The firm's static price-earnings ratio was 28.16 as of March 5, it said, comparing that to seven other listed insurers who had an average static PE ratio of 20.3.

Competition in the property and casualty insurance market was fierce last year, and expenses were unprecedented, according to a Huachueng Securities commentary on the group's January premium income. Net profit at PICC Property and Casualty, Ping An Property & Casualty Insurance and China Pacific Property Insurance fell 25.5 percent, 21.9 percent and 30.6 percent over the first three quarters, it added, forecasting that with heightened supervision and lower costs this year, PICC Property and Casualty's profit margin would increase this year.

PICC Group's share price has surged since, more than doubling over the last three weeks and hitting the 10 percent limit up on several occasions.

Beating the Market

The firm's competitors have also made solid gains in their mainland stocks over the same period, though not rising as quickly as PICC Group. China Life Insurance has added 27.3 percent to CNY28.6 as of 1.42 p.m, Ping An Insurance Group has gained 8.7 percent to CNY68.73, New China Life Insurance has jumped 16.5 percent to CNY49.49 and China Pacific Insurance Group has risen 7.1 percent to CNY32.87.

The Shanghai Composite Index, which tracks the bourse where all five of the insurers are listed domestically, has grown 12.3 percent to 2,682.39 over the same period.

The benchmark will fluctuate between 2,800 and 3,200 this month, per Citic's forecasts in a separate report, as the stock markets slow down following rapid growth since the beginning of this year.

Editor: James Boynton

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Keywords: PICC , Citic Securities