I like Ping An for several reasons, the insurance business is strong, new business value has been growing well, solvency is comfortable and the dividend is attractive. At around €5.90 the valuation also looks interesting relative to the underlying value of the business. The part that makes me more cautious is the risk profile. China is obviously the biggest one, but I’d also look closely at the RMB 6.49tn investment portfolio, because a balance sheet of that size is inevitably exposed to financial markets. Ping An Bank adds diversification but also credit risk, while interest rates can affect both asset values and investment returns. Demographics are a mixed factor too ageing creates opportunities in healthcare and retirement products, but also pressures some insurance lines. I’d also keep an eye on the convertible bonds, because they can create some dilution, and on what I’d call the valuation-trap risk. A stock can look cheap for years if the market believes the structural earnings growth has deteriorated. So for me the interesting question is not simply whether Ping An is cheap, but whether the discount is enough to compensate for these risks. At €5.90, I think the risk/reward is interesting, but I’d still treat it as a controlled position rather than a core holding.
