The blackout period is officially over. Four accelerated share offerings launched Monday night in Hong Kong amid soaring stock markets.
Singaporean life insurer Great Eastern Holdings raised $555 million after offloading 85 million shares in New China Life Insurance in a block trade last night, taking advantage of a 19% six-day spike in share prices in the mainland insurance company.
UBS meanwhile sought to raise $303 million by selling 490 million shares in China Cinda Asset Management, also utilizing strong stock market performance in the Chinese distressed asset manager to launch the block — its shares have risen 22% since April 2. UBS secured $245.2 million from the share sale, which priced on Tuesday morning.
In addition, Singapore firm GIC secured $65 million in a 60.5 million share sale of Far East Horizon, also under the sole lead of UBS.
Meanwhile, Cosmo Lady sought to raise up to $106 million as the Chinese lingerie company's management aimed to sell 123.9 million shares, or approximately 6.2% of its total outstanding shares, at a price range between HK$6.41 and HK$6.62 per unit. Morgan Stanley was the sole bookrunner.
New China Life
Great Eastern Holdings becomes the latest international insurer to offload some of its holdings in Chinese insurers, as very low margin bancassurance channels have prompted investors to reassess their ventures in China.
The 85 million-share sale was marketed between HK$50.50 to HK$51.80 per unit, representing a 1.5% to 4% discount to the April 13 close of HK$52.80, according to a term sheet seen by FinanceAsia. Credit Suisse was the sole bookrunner on the deal.
Shares priced at HK$50.65 per unit, towards the lower middle half of the initial range and a 3.7% discount to the April 13 close, allowing Great Eastern to net $555 million from the secondary share sale. Previously Great Eastern owned about 103 million shares in New China Life, but following the 85 million share sale, it now owns 18 million shares in the Chinese life insurer, according to a source close to the deal.
Shares in New China Life are up 34% year-to-date, and the insurer is trading at 16.20 its estimated 2015 earnings.
Allocations were still being finalised late Monday night in Hong Kong, but books were oversubscribed a few hours after the deal launched, a fairly even split between long-only institutional investors and hedge funds, the source told FinanceAsia. Geographically, the book was very global. There is a 45 day-lockup.
Great Eastern Holdings was one of the cornerstone investors in New China Life’s $1.9 billion initial public offering in December 2011. A total of four cornerstones pledged $780 million in the IPO of China’s third largest life insurer.
But a number of foreign investors have been paring down their stakes in Chinese insurers in the past few years. China heavily restricts the percentage foreigners can own in domestic insurers, and has also been regulating product approvals, as well as the pace at which insurers expand across the country. In addition, Chinese domestic insurers are competing with wealth management companies, which often offer higher-yielding products.
Zurich Insurance Group for example, which first invested in New China Life in 2000, sold $1.9 billion worth of shares during the company’s dual listing in Hong Kong and Shanghai in December 2011, and had been at the time widely expected to reduce its holdings further.
Less than two years later, in July 2013, Zurich Insurance sold 97.5 million shares, or 3.1% of New China Life’s total issued share capital, for about $283 million.
Then, just four months later in November 2013, Zurich Insurance offloaded its remaining 9.4% stake in the Chinese insurer.
The deal in November totalled $943 million, but 52.3% of that went to Swiss Re, with the Swiss re-insurance specialist agreeing to buy shares directly from Zurich Insurance ahead of the launch. Swiss Re purchased 152.8 million shares, or 4.9% of New China Life, acting as an anchor investor for the placement.
More recently, in July 2014, Singapore’s sovereign wealth fund Temasek Holdings sold its stake in New China Life, raising $276 million after offloading some 78 million shares.
China Cinda
UBS meanwhile sought to sell 490 million shares in China Cinda Asset Management at price range of HK$4.72 to HK$4.87 per unit, representing a 5% to 2% discount to the April 13 close of HK$4.97 per unit, according to a term sheet. UBS was the sole bookrunner on the deal.
A lack of investor-takeup saw the deal size shrink to 400 million shares, which priced Tuesday morning at HK$4.75 per unit, towards the bottom half of the range. UBS netted $245.2 million from the sale.
It was the second block in the distressed debt manager in less than week, with Citic Capital Financial offloading its entire stake in China Cinda on April 9 and raising $140 million in the clean-up trade.
China Cinda shares are up 29% so far this year. The distressed debt manager is trading at 9.4 times forecasted 2015 earnings.
The third deal meanwhile allowed Singapore firm GIC to secure $65 million in a 60.5 million share sale of Far East Horizon. The shares were marketed between HK$8.30 to HK$8.50 per unit, a 3.5% to 1.2% to the April 13 closing price of HK$8.60 per unit.
Shares priced early Tuesday morning at HK$8.38 per unit, representing a 2.6% discount to the last close. Books were multiple times oversubscribed, according to a source close to the deal.
Blocks
These accelerated blocks are Hong Kong’s latest as stock markets soared in the past few days. Following the Easter holiday, the Hang Seng Index rallied to a seven-year high, surpassing the 27,000 mark as Chinese investors continue to purchase H-shares via the Shanghai-Hong Kong Stock Connect. The index has jumped 5% from April 8 up to April 13, closing Monday at 27,509.97.
The Shanghai Stock Exchange Composite Index meanwhile has risen 7% since April 2.
The surge of money entering Hong Kong follows an announcement last week that Chinese mutual funds will be allowed to participate in the Shanghai-Hong Kong Stock Connect programme.
For the moment, Hong Kong’s stocks are cheaper than A-shares, although Hong Kong valuations will continue to move closer to their Chinese counterparts should mainland investors continue to pile into Hong Kong.
Over the weekend, Charoen Pokphand Group (CP Group) and Japanese trading firm Itochu through their joint venture sold their 1% stake in Citic Ltd and raised $470 million. The trade ensures Citic Ltd meets the minimum free-float requirement by the Hong Kong Stock Exchange, and will allow CP Group and Itochu to proceed with a previously announced 20% stake purchase in Citic Ltd for $10.4 billion, as China’s state-owned giants open doors to more private capital.
