China Traders Are Paying Double for PICC Shares After IPO Surge

(Bloomberg) -- People’s Insurance Company (Group) of China Ltd. has rallied so much since its debut in Shanghai last week that its stock costs more than twice as much as it does in Hong Kong.

China’s largest property insurer has surged by the daily limit every day since its initial public offering to trade at 7.04 yuan per share on the mainland on Thursday afternoon. In Hong Kong, PICC Group shares cost the equivalent of 3.02 yuan.

While it’s common for equities to command higher prices in Shanghai than across the border in Hong Kong, this gap is notable: it’s the second biggest among all dual-listed financial firms, just after Central China Securities Co Ltd., according to data compiled by Bloomberg.

China Traders Are Paying Double for PICC Shares After IPO Surge

The premium is “excessive" and “isn’t sustainable," Steven Lam, an analyst at Bloomberg Intelligence, wrote in a note. Earnings prospects don’t warrant the share-price pop, Lam said.

PICC Group was the first insurance company to list on the mainland in seven years, and the IPO was the second-largest in China this year, despite getting reduced in size amid weakness in the equity market. The Shanghai Composite Index has fallen 20 percent in 2018, one of the world’s worst performers.

The 12-month lock-up on A shares held by institutional investors such as China Life Insurance Co. Ltd. and China Taiping Insurance Holdings Co. Ltd. may be giving individuals the confidence to buy, Lam said.

The rally in PICC Group’s A shares contrasts sharply with its peer Ping An Insurance (Group) Co., which has yuan-denominated shares that trade at a discount to those in Hong Kong.

©2018 Bloomberg L.P.