Leading financial services company JPMorgan has singled out three Asian insurance companies whose stocks are expected to perform well. One firm is based in India, while the other two are in China. These are the top two most populous countries in the world and are excellent environments for investors seeking growth, it suggests.
In India, ICICI Prudential Life Insurance is the largest private life insurer in the market, which is traditionally dominated by government-owned Life Insurance Corporation of India. ICICI Prudential just had its IPO last month. It has an Overweight rating and a price target of INR380 (US$5.69) versus its recent share price of INR325 (US$4.87). However, this upside of around 14% is modest compared to the two Chinese firms mentioned.
China Life Insurance and Ping An Insurance, both listed on the Hong Kong stock exchange can almost double their share prices. China Life has a price target of HKD38 (US$4.85), which is 89% higher than current stock prices. Ping An’s target of HKD80 (US$10.20) means a potential gain of 98%.
Both insurance markets have bright outlooks, but it’s noticeable that Chinese shares have a much higher upside. This is due to Chinese shares having lower valuations. ICICI Prudential trades at 31 times next year’s earnings, while it’s just 14 times for China Life and 10 times for Ping An.
Investors are worried Chinese insurers may encounter difficulty in recreating past profits due to falling interest rates and slowing stock gains. As such, they may be forced to increase their reserves, which will negatively affect profits. However, JPMorgan says that some of those concerns are overstated and that strong product growth in the coming quarters will reinvigorate investor confidence and cause a rebound in valuations.
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