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Insurer soars amid easing vow

Top News | Samantha Wong,Bloomberg and Reuters Nov 14, 2017
Shares of insurance company AIA climbed 6 percent yesterday as punters reacted positively to Beijing's announcement that it will allow overseas firms to take majority stakes in mainland insurers, fund managers and securities ventures.

Shares of the group closed at HK$65.30, up HK$3.70, as the Hang Seng Index added 0.21 percent, or 61.26 points, to 29,182.18.

Morgan Stanley said Beijing's deregulation in the financial sector will attract fresh foreign capital inflows to the country, and push up the valuation of AIA as it has a good operating history in the mainland.

Overseas companies will probably focus on increasing their presence in China's insurance, securities and fund- management industries, which have "significant room for development," said Oliver Rui, professor of finance at the China Europe International Business School in Shanghai.

The lending business, dominated by government-run behemoths like Industrial and Commercial Bank of China, will attract less interest because it is a "saturated" industry and foreigners lack a competitive edge, he said.

China took a major step toward the long-awaited opening of its financial system, saying it will remove foreign ownership limits on banks on Friday.

The country will lift the foreign ownership cap to 51 percent for life insurance companies after three years and remove the limit after five years.

Policy makers had hinted at an opening in recent months. The Foreign Ministry said entry barriers to sectors such as banking, insurance, securities and funds would be "substantially" eased "in accordance to China's own timetable and road map."

People's Bank of China governor Zhou Xiaochuan advocated for greater competition in the financial industry in June, while one of his colleagues penned an article last month arguing that increased foreign participation would help the sector adopt better corporate governance and risk-management practices.

Mainland developer Country Garden gained 5.7 percent to HK$12.98, while smartphone camera lens maker Sunny Optical Technology surged 6 percent to HK$149 following the announcement that they will join the Hang Seng Index from December 4.

Shares of Cathay Pacific and Kunlun Energy declined 1 percent and 4 percent respectively following the decision to remove them from the blue-chip index from December 4.

The deletion is the latest blow for Cathay Pacific, founded in 1946, after it was removed from MSCI's Hong Kong index in May.

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October 2018