If Ping An Insurance Group is indeed mulling plans to cut its stake in HSBC further, now would surely be the time to do it.
A Bloomberg report published Friday May 17 claims that Ping An is weighing up its options. One is to cut its 8% stake in the UK-headquartered lender, which is currently worth $13.3 billion. Last week, Ping An sold 5.65 million shares in HSBC, netting it HK$391 million ($50.1 million). This came days after Noel Quinn announced his surprise resignation as HSBC chief executive.
Ping An has several options on the table. It could divest another parcel of shares or sell a sizeable stake to a second party: Bloomberg cited the possibility of a Middle East-based sovereign wealth fund or super-wealthy investor taking some of Ping An’s HSBC shares off its hands. Members of the Chinese firm’s board, it noted, are currently touring the Gulf.
If there is a time to sell, it is surely now. Ping An fought for years to split HSBC in two by carving out its more profitable Asia business.
While the insurer failed to convince investors to back its plan, its broadsides against HSBC management bore fruit: the bank’s pivot to Asia under Quinn, married to its sale of non-core businesses in the Americas and Europe, freed up capital and won approval from investors.
HSBC’s London-listed shares are up 13% year to date and up 151% since September 2020.
The bank’s pivot to Asia under Quinn, married to its sale of non-core businesses in the Americas and Europe, freed up capital and won approval from investors
Ping An’s recent market moves could also be personal. Relations between HSBC and its largest shareholder were seen to have improved since the bank reinstated its dividend last year. But the insurer’s decision to vote against Quinn’s re-election as a director at his final shareholder meeting in early May suggests some measure of residual bad blood.
If the Chinese insurer does decide to sell a sizeable stake to a Middle East-based fund or ultra-wealthy investor during or after its swing through the Gulf, again, that would be no great surprise.
Geopolitics is shifting fast, not just in terms of sovereign relations, but in the context of the direction of capital flows, and how and where capital markets deals are structured.
A particular shift is the rising interest among Gulf-based funds in Asia assets, and Chinese assets in particular, at the expense of the West. “Middle East flows of capital into Asia are huge,” says a senior Hong Kong-based investment banker, who says he has spent more time in the Gulf region in the past year than over the last two decades.
Another banker says his US firm is “currently working on 20 live Middle East-Asia deals right now, mostly [driven by Gulf-based] sovereign wealth funds. The eastward diversification from the Middle East is very real.”
In March 2023, oil firm Saudi Aramco bought a 10% stake in privately controlled Chinese refiner Rongsheng Petrochemical, for $3.6 billion. And in December, Abu Dhabi investment vehicle CYVN Holdings invested $2.2 billion investment in Nio, upping its stake in the Chinese electric vehicle maker to 20.1%.
Gulf-originated M&A into China totalled $12.3 billion in 2023, against just $6 million the previous year, according to data from Dealogic.
If this is indeed the tip of the deal iceberg, there is probably never going to be a better time for Ping An to sell a sizeable chunk of its stake in Asia’s largest and one of its best run lenders.
If not now, when?
