Following China Life Insurance Co. Ltd.’s resolution to depart the New York Stock Exchange amid an ongoing standoff between Beijing and Washington, the efficiency of some remaining U.S.-listed Chinese insurance gamers suggests buyers wouldn’t mourn further such departures.
China Life formally exited the NYSE on Sept. 2. Four different main state-owned entities in strategic sectors have related plans for what appears to be the endgame in a yearslong battle the place U.S. monetary regulators demanded extra entry to the books of U.S.-listed Chinese firms.
The Biden administration has been considerably much less aggressive towards Chinese firms than its predecessor, which launched the Holding Foreign Companies Accountable Act in December 2020. The two nations just lately reached a compromise to permit Chinese companies remaining on U.S. exchanges to have their accounts audited in Hong Kong.
Equity costs crumbling
Chinese firms within the insurance house listed on main U.S. exchanges embrace Fanhua Inc., Huize Holding Ltd. and Tian Ruixiang Holdings Ltd. together with insurtech Waterdrop Inc., all of which have seen their stocks fall precipitously during the last yr.
Waterdrop’s shares have adopted an identical downward spiral as its U.S. insurtech friends. After an IPO in May 2021 at $12.00 per share, the Chinese insurtech’s inventory closed at $1.20 on Sept. 9. In distinction, the S&P 500 Insurance index is up round 7% over the identical interval.
Tian Ruixiang has been on a rollercoaster journey since itemizing within the U.S. in January 2021, surging greater than 1,000% on its debut earlier than falling again to earth. Press studies on the time instructed sharing the identical three letter-abbreviation TRX because the Tron cryptocurrency as one doable cause behind the surge. In June, Tian Ruixiang stated Nasdaq had notified the corporate that it was “not in compliance with the minimum bid price requirement” of $1 per share.
Huize Holdings and Fanhua are each would-be disruptors hoping to make use of digital channels to attach insurers with shoppers, however Chinese tech stocks specifically have seen steep share value declines amid broader considerations about China’s financial system, significantly the property market.
Other Chinese insurers are open to U.S. buyers by way of the over-the-counter market, together with Ping An Insurance (Group) Co. of China Ltd., Zhong An Group Ltd. and China Pacific Insurance (Group) Co. Ltd. But based on an August word from legislation agency White & Case, the HFCAA threatens to ban the buying and selling of those securities within the U.S. by way of the OTC market “by 2024, if not earlier.”
For the week ending Sept. 9, Huize was up 11.24%, Fanuha misplaced 0.39%, and Tian Ruixiang rose 13.70%.
Insurance stocks as an entire carried out a bit higher than the broader market because the S&P 500 Insurance index elevated 3.97% this week to 562.37, whereas the S&P 500 gained 3.65% to complete at 4,067.36.
Silver lining
But given the overall decline in an array of Chinese stocks — the broader S&P China BMI is down round 40% since Waterdrop’s IPO — the longer term for the Chinese insurance market is probably not as gloomy because the figures for these listed within the U.S. may counsel.
Waterdrop executives throughout a Sept. 9 earnings convention name had been bullish concerning the insurtech’s long-term prospects, saying that China’s getting old inhabitants means the demand for insurance will improve within the years forward.
China continues to be a vastly underinsured market in comparison with the U.S., which ought to present runway for development. A latest report by Munich Re famous that solely about 2% of financial losses brought on by pure catastrophes within the nation are insured.