China Life Insurance Co, the country's largest life insurer, will buy 32 per
cent of the shares of Guangdong-based China Southern Power Grid, becoming its
second-largest shareholder.
The life insurer will buy assets worth 35
billion yuan (US$4.4 billion) from the State-asset management bureau under the
Guangdong provincial government, which is the largest shareholder of China
Southern Power Grid.
"The equity investment into Southern Power Grid
provides us a good opportunity to boost our returns," said Yang Chao, chairman
of China Life.
As planned, the Guangdong government would inject the
money into Guangdong Development Bank (GDB) to increase its capital adequacy
ratio and lower its non-performing loans.
Last month, an investment team
led by Citigroup won a 24.3 billion yuan (US$3.07 billion) bid for control of
GDB, and China Life got a 20 per cent stake of the bank.
"We are also in
discussion with Huishang Bank (in East China's Anhui Province) for an equity
investment," Yang disclosed, adding the insurer is now doing due
diligence.
Meanwhile, China Life is also quite active in expanding
investment into non-financial sectors this year. Besides getting 32 per cent of
the shares of China Southern Power Grid, it is also bidding for 650 million
shares in China Communications Construction Company, which will be listed on the
Hong Kong bourse on December 15.
"Those moves should be financial
investments instead of strategic ones, as part of China Life's efforts to find a
better match between long-term liabilities and assets," said Hao Yansu, a
professor with the Central University of Finance and Economics.
He
believes infrastructure and utilities are perfect assets for life insurers
because of their low volatility and long investment durations.
While
expanding its investment portfolios, China Life has also quickened its steps
towards listing on the Shanghai bourse. "We aim to list shares on the domestic
market by the end of the year or in early 2007 to give investors a chance to
share in our growth," Yang Chao said.
But a source close to the deal told
China Daily the listing date could be as early as December 15 if everything goes
smoothly.
China Life sent its application to the China Securities
Regulatory Commission in October. It is still waiting for the go-ahead from the
regulator.
"The ever increasing Shanghai benchmark index and the brisk
turnover recently all sets the year-end as a perfect time for the listing," said
an analyst with CITIC Securities.
China Life said earlier it planned to
launch 1.5 billion A shares, accounting for 5.3 per cent of its total equity.
China Life shares rose 0.52 per cent to HK$19.22 (US$2.5) yesterday. The stock
has nearly tripled since the start of the year.
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