Is HSBC trying to sell its stake in Ping An to China’s sovereign wealth fund?

November 20, 2012
November 20, 2012

That was fast. HSBC Holdings may have already found the best buyer for its billion dollar stake in China’s Ping An Insurance. The British bank confirmed yesterday that it is seeking to offload its 15.6% stake in China’s second largest insurer. Reports now say the bank has reached out to China’s massive sovereign wealth fund, Chinese Investment Corp (CIC).

We named reasons why HSBC would sell Ping An when China’s insurance industry is booming, but also noted some difficulties in the deal. If CIC, which helps manage the country’s foreign reserves, buys the stake in Ping An that would solve most of those. A purchase by CIC would not encounter the same scrutiny from Chinese regulators as a foreign buyer. Also, Chinese regulators have historically only approved financial groups to own stakes in the country’s major banks and insurance companies. CIC already has shares in the country’s big four banks.

Some analysts also fear the initial $3-4 billion public offering of Pacific Insurance Company of China could steal away potential buyers who would be interested in the Ping An stake. Another concern is that the size of the stake would make it hard to find one single buyer. Last year, a consortium of buyers bought Bank of America’s $6.6 billion stake in China Construction Bank. But CIC, with a little over $480 billion in assets, is one of the largest sovereign wealth funds in the world and could manage the purchase on its own.

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