How Enthusiastically Will Investors Respond?

By Yoon Ja-young

Staff Reporter

Samsung Life Insurance, the country's biggest insurance business, is scheduled to debut on the bourse on May 12.

The insurer set the initial public offering (IPO) price at 110,000 won. It succeeded in setting the top of its price band as it wished, but it is to be seen whether investors will gain further after the listing.

The 110,000 won IPO price means its price book-value ratio (PBR) is 2.02, higher than 1.86 PBR of Korea Life Insurance.

Stock market investors are also watching in case the debut of the giant insurer might negatively affect the stock market in the short term, as there will suddenly be a surplus in stocks. After the listing, the insurer is expected to take around 2 percent of the stock market.

According to Korea Investment & Securities, one of the lead managers for the listing of the insurer, demand for Samsung Life Insurance stocks was huge among institutional investors.

Analysts agree that the market is responding more favorably than when Korea Life Insurance debuted on the bourse.

"The atmosphere is friendlier and considering that the stock market condition has improved compared with in March, the outlook is positive," said Kim Sung-no, a strategist at KB Investment & Securities.

Korea Life Insurance expected the IPO price to be determined at above 10,000 won, but the market set the IPO price at around 8,000 won.

Samsung Life Insurance, however, successfully set the pricing at what it targeted. Analysts point out that it is enjoying a premium for being the top life insurer in the country, as well as getting extra points for its significance in the country's biggest conglomerate, Samsung Group.

With the retirement pension market growing, Samsung is getting attention as one of the strongest players in the market.

However, some point out that Samsung Life Insurance is already a huge client for institutional investors.

The life insurer, with over a 100 trillion won fund, is a VIP client for institutional investors that also work as an agent for management of the fund. They have plenty of reasons to maintain friendly relations with Samsung Life Insurance and thus raised the IPO price of the insurer, some analysts point out.

As the IPO price was set high, the stock of the insurer may not have much momentum for further rise after listing. Samsung Life Insurance is traded at 122,500 won in the over-the-counter market, which means that there will be around 10 percent profit as of now, but stock prices used to stabilize after an IPO due to the huge inflow of stocks as seen in the case of Korea Life Insurance.

Also worth considering is that the massive inflow of stocks, worth 5 trillion won, can negatively affect the stock market.

"When considering the equity fund investors' withdrawal of money from funds, institutional investors would have to alter the ratio of other stocks to participate in the Samsung Life Insurance IPO," Kim at the KB Investment & Securities said. Institutional buying of the insurer is expected to be around 1 trillion won stocks. It means they will have to sell other stocks.