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China's Ping An Tumbles as A-Share Lockup Ends

Shares in China's Ping An Insurance, which is planning one of the world's biggest equity sales, fell sharply on Monday as $31 billion worth of the company's local-currency A shares were freed up for trade after a lockup period.

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Ping An's A shares slid as much as 4.54 percent in morning trade after Huludao Zinc, one of about 70 institutional investors that hold Ping An A shares due for release, said it would sell them.

The official China Securities Journal also estimated that up to 41 investors were likely to sell up to 85 billion yuan (US$11.95 billion) worth of Ping An shares, although not necessarily in one day.

Ping An's H shares traded in Hong Kong fell as much as 5.26 percent and were still down 3.95 percent.

"Ping An's A shares were hit by profit-taking as all institutional investors had bought its shares at much lower prices," said insurance industry analyst Wang Xiaogang at Orient Securities. "Its H shares were partly pressured by the A-share fall and partly by weakness in global markets."

Hong Kong's blue-chip Hang Seng Index fell almost 3 percent in Monday morning trade, hit by Friday's Wall Street dive, while the Shanghai Composite Index was up over 2 percent.

The Shanghai-listed A shares in China's second-biggest life insurer have tumbled around 30 percent since it announced on Jan. 21 a plan to issue up to 1.2 billion local-currency A shares, or 16 percent of its current share capital, plus convertible bonds with warrants.

At Monday's market price, the whole offer could raise about 120 billion yuan, or several times the size of China's biggest equity refinancing so far.

Tempted To Sell

"Our company has decided to empower our board to select an appropriate time to sell Ping An shares on the open market," Huludao Zinc, which owns 2 million Ping An A shares, said in a filing with the Shanghai Stock Exchange.

Huludao did not give a reason for the planned sale, but uncertainties surrounding Ping An's huge fund-raising proposal have already sparked harsh criticism and share sales from other investors.

Ping An is scheduled to convene a shareholders' meeting on Wednesday to vote on the proposal, but the market remains unclear whether the equity offer will be approved or whether Ping An might revise it to placate minority shareholders.

Many in the market believe that, if the plan wins approval and it is carried out as is, Ping An's shares will fall further.

On Monday, a total of 3.12 billion Ping An A shares, worth a combined 222 billion yuan based on their Friday closing price, hit the market after a one-year lockup period that followed their listing in early March 2007.

Institutional investors may be tempted to sell the shares in part to lock in gains after purchasing them at a bargain price.

Of the shares that were placed into lockup, 11 percent were bought for 33.8 yuan each during last year's initial public offer, while many shareholders also built up positions at much lower prices before the IPO.

"We estimate that 41 of Ping An's shareholders may sell around 1 billion shares worth a combined 85 billion yuan, although they may not sell them at the same time," the China Securities Journal said on Monday.

But the China Business News said many institutions might wait for a better price to cash in their holdings. "Ping An's shares have plunged more than 50 percent from their peak (in October 2007) and they have become good value as an investment," the newspaper said. "While many may want to sell, others may also be willing to buy."