HSBC expands into Chinese insurance market with $1bn deal

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The Independent Online

HSBC will spend $1.039bn (£551m) to double its stake in the Chinese insurer Ping An, making it the largest foreign investor in the country's financial services industry.

HSBC will spend $1.039bn (£551m) to double its stake in the Chinese insurer Ping An, making it the largest foreign investor in the country's financial services industry.

The British banking giantagreed to pay HK$13.20 ($1.69) a share yesterday to acquire another 9.91 per cent of China's second-biggest insurer, increasing its stake to 19.9 per cent, the maximum holding allowed for foreign investors under Chinese law.

The price represents a premium of 9 per cent to Ping An's closing price on the Hong Kong exchange on 6 May.

Sir John Bond, the HSBC chairman, said, "This year marks the 140th year of HSBC's continuous presence in mainland China and our proposed additional investment in Ping An Insurance demonstrates the confidence HSBC has in the future of the country. We are optimistic about the long-term prospects of the insurance industry in mainland China."

Analysts said HSBC did well to diversify its operations in China and noted that it was a relatively new player in China's insurance market, which has tripled in the past five years to $52bn. HSBC is buying the Ping An shares from the US investment banks Goldman Sachs and a subsidiary of Morgan Stanley, which acquired the shares in 1994. They paid $35m each for 7.5 per cent stakes.

Britain's largest bank also holds a 19.9 per cent stake in Bank of Communications, China's fifth-largest lender, and an 8 per cent stake in Bank of Shanghai. Of the foreign banks operating in mainland China, HSBC has the largest branch network.

Its British rival RBS is thought to be vying with nine other Western lenders, including Bank of America, Deutsche Bank and UBS to take a stake in Bank of China, the country's top foreign-exchange bank, in the run-up to its flotation.

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