2nd UPDATE:China Life Seeks To Raise Stk Invest;Eyes Grp IPO

Sep.09, 2008 in U.S Hot Stocks

Last Update: 9/9/2008 5:11:12 AM

(Adds China Life executive’s comments on overseas acquisitions, closing level for
benchmark index.)

DUNHUANG, China (Dow Jones)–China Life Insurance Co. (LFC), the largest investor
in China’s stock market, said Tuesday it will seek to raise its investment in
equities, after the country’s bourses fell by more than 50% since the start of
the year.

“We have already seen value for medium- to long-term investment in the Chinese
stock market, so we will seek the opportunity to increase equities investments,”
said Wang Junhui, an executive vice president of the company’s asset management
department. Wang was speaking at a company briefing for analysts, fund managers,
and foreign and local media in Dunhuang, western China.

Wang didn’t give specific details on China Life’s plans for equity investment,
but his comments illustrate how some institutional investors in China are finding
current market values attractive for bargain hunting.

China’s benchmark Shanghai Composite Index ended up 0.1% at 2145.78, after
falling to an intraday low of 2114.50, below the 21-month closing low of 2143.42
Monday.

At the end of June, stocks and mutual funds accounted for 13.25% of China Life’s
investment portfolio, down from 22.95% at the end of last year, according to its
first-half earnings report.

To diversify risks on its more than $133 billion worth of assets, China Life will
also increase its investment in unlisted companies, Wang said, without
elaborating.

China Life has said such private equity investments will account for 5% to 10% of
its investment portfolio, with a focus on financial companies and infrastructure
sectors, such as power, ports and airports.

China Life’s chief investment officer, Liu Lefei, reiterated the company’s
interest in buying stakes in foreign financial companies. He said talks with
foreign firms are still in progress, but didn’t eleborate on any potential
targets.

Yang Chao, president of China Life’s parent China Life Insurance (Group) Co.,
said the group is working toward a listing of its whole operation, though the
timing isn’t right yet.

“As a responsible company, it will only have a group listing when the time is
ripe or when the group is ready for it,” Yang, who is also the chairman of the
listed life insurer, said at the briefing.

Yang’s comments echo those of Wu Dingfu, the chairman of the China Insurance
Regulatory Commission, who said last week he expects the parent of China Life to
list its entire assets in due course.

Yang said the firm had cleared two of the three hurdles to an initial public
offering.

“The company has won the lawsuit brought against it by U.S. investors and has
raised its solvency ratio to the minimum required by Chinese regulators, but our
interest margin remains negative, which is the biggest issue for the whole
listing,” he said, without elaborating.

A U.S. court Thursday dismissed a lawsuit that accused China Life of concealing
during its $3.46 billion listing in 2003 that the government had launched a probe
into fraud allegations.

The lawsuit was filed in March 2004 after China’s National Audit Office published
a report on its Web site that said an investigation of China Life’s predecessor
firm found several cases of irregular or illegal behavior involving a total of
$652.4 million in the period to 2002, before the company was restructured for its
IPO during 2003.

At the end of last year, Hong Kong-, Shanghai- and New York-listed China Life
Insurance Co. was 68%-owned by state-owned China Life Insurance (Group) Co.

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