Stocks Gain on Quake Rebuilding Prospects 0514

Stocks Gain on Quake Rebuilding Prospects

Insurance stocks revived after the companies reported limited exposure to the Sichuan earthquake, helping the Shanghai index rise nearly 100 points.

The Shanghai Composite Index closed Wednesday at 3657.43, up more than 97 points from Tuesday's finish, as investors looked into the profit potential of post-earthquake reconstruction in southwest China and showed confidence in insurers.

Insurance companies gained after reporting limited exposure following the May 12 disaster centered in Sichuan Province. The nation's largest insurance company China Life (SSE: 601628) advanced 2.21 percent to 32.33 yuan per share, Pacific Insurance (SSE: 601601) climbed 3.6 percent to 25.58 yuan, and China Ping An (SSE: 601318) gained 0.13 percent to 62.90 yuan.

The Shenzhen exchange index also rallied to close at 13532.226, raising the benchmark 3.4 percent above Tuesday's finish.

Yet on the Hong Kong market, stock in Chinese insurer PICC (HKSE: 2328) lost 0.7 percent, bringing its total retreat in recent days to more than 3 percent. China Ping An (HKSE: 2318) shared the same fate and dropped 1.6 percent, balancing out Tuesday's 1.53 percent advance.

Estimates of total insurance payouts to quake victims have yet to be released. However, insurance analyst Zhou Guang told Caijing that the greatest impact would be felt by PICC.

JP Morgan said in a Tuesday report that quake-related disruptions would likely cause short-term price volatility in affected areas, but that the overall economic impact would be small and temporary. It also noted post-earthquake reconstruction would pick up significantly, providing a strong boost to the regional economy.

China Life President Wan Feng said Wednesday that earthquake insurance payouts would exceed those paid earlier this year in the wake of serious snow and ice storms in the country's south. China Life has more than 110,000 insurance clients in Wenchuan County, the quake's epicenter, including 58,000 students.

Meanwhile, Ping An Chairman Ma Mingzhe said its exposure in the disaster area is limited. A Ping An Securities report said the insurer's premium coverage in Sichuan is a mere 2.02 percent, at 203 yuan per person, far less than along the country's east coast, and life compensation costs would be limited.

The earthquake killed more than 12,000 people and trapped another 25,000, official media reported. China Life, Pacific Insurance, and Ping An control market shares in Sichuan of 38 percent, 10.9 percent, and 10.7 percent, respectively.

The day after the disaster, trading was suspended for 66 Sichuan-based companies, including 45 listed on the Shanghai bourse and 21 in Shenzhen, due to a communications collapse. But some of those companies were allowed to return to the market Wednesday after releasing damage reports.

1 yuan = 14 U.S. cents