Published September 30, 2008
Ping An drops on concern over Fortis stake loss
Shares slide 11%, its biggest 2-day drop in over 4 years in HK trading

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(HONG KONG) Ping An Insurance (Group) Co, China's second-largest insurer, had its biggest two-day drop in more than four years in Hong Kong trading after saying that it may make further provisions for losses from its stake in Fortis.
The shares lost 11 per cent to HK$42.50 at the close, declining 19 per cent since Sept 25. That is the biggest two-day slide since Ping An listed on the Hong Kong stock exchange in June 2004. Hong Kong's benchmark Hang Seng Index fell 4.3 per cent yesterday.
Ping An may set money aside in its third-quarter results to cover losses from its stake in Fortis after shares of the largest Belgian financial services company fell to the lowest in 13 years last week, the Chinese insurer said in a Shanghai Stock Exchange statement on Sept 26. Still, the Shenzhen-based company has adequate capital and sound payment ability, it added.
'Investors are concerned that Ping An may have to write off its losses from Fortis, therefore eroding its profit,' said Ben Kwong, chief operating officer at brokerage KGI Asia Ltd here. 'Ping An's short-term outlook remains uncertain, particularly in such a volatile financial market.'
The Chinese insurer paid 1.81 billion euros (S$3.8 billion) for a 4.2 per cent stake in Fortis in November. Its 2.15 billion euros purchase of half of Fortis's asset management arm is still pending regulatory approval. Ping An booked a 10.5 billion yuan (S$2.2 billion) loss on the stake in the first half.
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Fortis received an 11.2 billion euro rescue package from Belgium, the Netherlands and Luxembourg over the weekend after its shares dropped 35 per cent last week in Brussels trading on concern that the company would struggle to replenish capital depleted by the 24.2 billion euro takeover of ABN Amro Holding NV units and credit writedowns.
'Fortis's situation is deteriorating and we're talking about a potential financial crisis happening with the company,' said Ivan Li, an analyst at Kim Eng Securities, who has a 'sell' rating on Ping An. 'The sale of some of their core businesses to the government is hurting the group's profit so Ping An will be inevitably affected, not to mention the writedown needed to account for the share slump.'
Fortis announced plans in June to raise 8.3 billion euros to bolster capital.
Ping An fell 49 per cent in Hong Kong this year. - Bloomberg