By Yoon Ja-young
Staff reporter
Samsung Life Insurance, which got a blockbuster response for its initial public offering (IPO), makes its debut on the bourse today.
Analysts expect the price to surpass 120,000 won ($106) as the market conditions are favorable for the biggest insurer in the country.
The insurer's opening price will be set at between 90 and 200 percent of the initial public offering (IPO) price of 110,000 won.
Analysts expect it is likely to be set at between 120,000 and 130,000 won, higher than the IPO price.
Shinyoung Securities recommended ``buying,'' and suggested 125,000 won as the target price, up 14 percent from the IPO price of 110,000 won, adding that it could surpass 130,000 won as prospects seem positive.
Park Eun-jun, an analyst at Shinyoung Securities, said Samsung Life means more than just a life insurance company. ``With the listing of the country's top insurer, the ratio of insurance shares in KOSPI is expected to increase to 5.5 percent from 3.1 percent. There will be an upheaval in the market,''
Due to bank-focused financial market policies, banks account for 70 percent of the financial assets here. The imbalance between financial industry players hindered development of the industry. With its listing, however, Samsung rises to become the top fourth in the bourse in terms of market cap, surpassing Shinhan Financial and KB Financial.
He came up with the 125,000 won target price by applying a price/enterprise value (P/EV) ratio of 1.3.
He said the market is favorable for Samsung Life Insurance in the short-term perspective, with events such as the inclusion to the Morgan Stanley Capital International Korea Index and KOSPI200 awaiting, and demand for the stocks by management firms that failed to participate in the IPO.
The mid-term perspective is also positive, as there is momentum for the insurer to enhance corporate value as a reverse margin would decrease upon the rising interest rate. He added that the aging population and changing demographic structure are positive factors in the long-term, as demand would grow on various insurance products. Analysts have a positive outlook on the insurance industry here as a low birth rate, aging, and retirement of the baby boomers will result in life insurance businesses playing a bigger role in the country that is not equipped with a good social safety net.
Analysts point out that there is only a limited amount of shares available for trading. Some 72.77 percent of shares, belonging to major shareholders and employees, can't be sold from six months to one year, and many of the institutional investors who participated in the IPO also promised not to sell their shares before 15 days to one month.
The global stock market, which had tumbled due to fiscal problems in Greece and other Southern European countries, has also stabilized ahead of the Samsung listing thanks to the announcement of bailout programs by the EU and IMF.
Some analysts even say that foreigners, who sold off Seoul stocks during the tumble, may choose Samsung Life stocks when they come back to the bourse.
However, foreigners are still the biggest risk factor for Samsung, as they may continue dumping Seoul stocks, including Samsung Life while turning to other safety assets.