Share prices of China’s Ping An Insurance slumped on March 22 after the conglomerate reported a net loss of more than USD 2.5 billion in 2023 in its asset management business, swinging from profit the year before, as the sector is hit by volatility in the Hong Kong and Chinese stock markets.
The red ink sheds light into ongoing investor concerns as the major private insurer adjusts future investment return assumptions downward, citing the need for a more cautious approach.
Ping An’s asset management business includes trust, securities, financial leasing and fund management. The segment recorded a net loss of RMB 19.6 billion (USD 2.7 billion) in 2023, compared to a net profit of RMB 3.8 billion (USD 523.2 million) in 2022. It’s also the first time the segment, which manages a total of RMB 7 trillion (USD 963.9 billion) in assets, recorded a net loss since comparable data from 2016, according to consolidated financial results.
“Affected by the macroeconomic environment, some assets came under pressure due to rising credit risks and volatile capital markets in 2023,” according to the results released late Thursday. The net loss dragged down Ping An’s overall net profit attributable to shareholders, which fell more than 22% to RMB 85.7 billion (USD 11.8 billion) in 2023 from RMB 111 billion (USD 15.2 billion) in 2022.
Market volatility in Hong Kong and mainland Chinese stocks as well as provisions made to “certain projects” resulted in the net loss in the asset management sector, Rebecca Fu, senior vice president, told a news briefing about the results in Hong Kong on Friday.
“Market declines and volatility [in China and Hong Kong] have brought a relatively big impact to the whole finance industry, including the insurers,” Fu said.
When asked by Nikkei Asia if provisions included holdings by Ping An Asset Management in Country Garden Holdings, a top Chinese private developer facing a liquidation petition by an offshore creditor in Hong Kong, Fu said it is not due to any single project.
“We conducted an impairment test of our existing assets, and made some provision in the fourth quarter,” she said. “We believe this act is to improve the quality of our balance sheet, not due to one or two projects, including the project mentioned [Country Garden].” She added that the group’s total exposure to Country Garden is “very small.”
Ping An Asset Management, on August 11 last year, sold stakes in Country Garden that brought its holding in the developer down to 4.99%. The developer’s stock price has since dropped by more than 45%.
Hong Kong shares of Ping An fell as much as 6.7% on the morning of March 22 before paring losses in the afternoon to close at HKD 33.5 (USD 4.2), down 5.8%. Its Shanghai-listed shares, which are denominated in RMB, closed 3.5% lower at RMB 40.56 (USD 5.6). Hong Kong’s Hang Seng Index, meanwhile, dropped more than 2% while Shanghai’s CSI 300 closed 1% lower for the day.
“A single day’s stock price drop doesn’t reflect our fundamentals, the stock price is undervalued,” Fu said. “We think the stock price decline is in a completely different direction from our fundamentals.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.