PREVIEW-AIA seen up 11 pct on debut after record HK IPO

* Set to debut at HK$21.79 vs IPO price of HK$19.68 – poll

* AIA trading 11 percent higher in gray market – traders

* AIA first day pop reminiscence of ICBC’s strong start

* AIA due to start trading on Oct. 29

By Donny Kwok and Denny Thomas

HONG KONG, Oct 27 (BestGrowthStock) – AIA Group Ltd (1299.HK: ) is
expected to post a double-digit gain in its trading debut on
Friday as investors scramble for a slice of one of Asia’s most
recognised life insurance brands after its record Hong Kong
IPO.

AIA’s wide Asian footprint, strong life insurance cashflow
and its large, $30.5 billion market value are some of the main
draws to investors, helping the unit of AIG (AIG.N: ) price at
the top of its indicative range last week. [ID:nTOE69K099]

A Reuters poll forecast AIA to start trading at HK$21.79
each, a 10.7 percent premium to its IPO price of HK$19.68. The
estimates ranged from HK$21.00-HK$23.00. Twelve fund managers,
analysts and traders participated in the poll.

“Prospects of joining some major indices (locally and in
the region) have made it an attractive defensive buy among
institutions,” said Patrick Yiu, a director as CASH Asset
Management, who expects the shares to debut between 5-10
percent higher.

AIA’s market capitalisation means that the stock is likely
to be included in the benchmark Hong Kong stock index (.HSI: ),
generating demand from index tracking funds. CLSA estimates AIA
to have a 5 percent weighting in the Hong Kong index.

AIA displaced Industrial and Commercial Bank of China Ltd
(1398.HK: ) as Hong Kong’s biggest IPO, after raising $17.9
billion last week. ICBC’s $16 billion Hong Kong IPO rose 15
percent on its opening day.

AIA shares were quoted about 6 percent higher in gray
market trading on Wednesday, according to traders.
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For BREAKINGVIEWS on AIA valuation [ID:nLDE6930KI]

Factbox on world’s biggest stock offerings [ID:nN17141638]

Insider clip on IPOs: http://link.reuters.com/dar67m

Graphic on top global IPOs: http://link.reuters.com/kum57p

Graphic on AIA in Asia http://link.reuters.com/xed59p
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SOLID START

Hong Kong has been at the centre of a boom in Asian IPOs
which has seen the region raise a record $124.7 billion so far
this year, accounting for more than 66 percent of all global
volume, according to Thomson Reuters data.

American International Group plans to use some of the
proceeds of the AIA sale to pay back the roughly $100 billion
it still owes the U.S. government after its 2008 bailout.

At the top end of the expected first-day price range, AIA
will trade at a price to embedded value (P/EV) ratio of 1.5,
while China Life (2628.HK: ) and Ping An Insurance Co Ltd
(2318.HK: ) trade at P/EV of over 2 times.

AIA has the advantage of being a widely recognised name in
both the home market and across much of the region.

High profile IPO names tend to get heavy interest from Hong
Kong’s famously aggressive retail investor pool. Stock trading
is ingrained in the city’s culture, from taxi drivers to
shopkeepers, students to retirees.

With AIA serving more than one million policy holders
through over 8,000 agents in Hong Kong alone, the company is a
household name, which partly explains the demand for the stock
in the gray market.

“Its a good one to hold for long. The stock should gain
good support from warrant issuers,” said Andrew To, a sales
director at Tai Fook Securities, who expects between 8-15 pct
rise on debut.

One institutional dealer said that the gray market demand
for the stock is coming from traditional long only funds, while
hedge funds were trimming some of their positions. He said
there was large buy orders in a HK$22.00-HK$22.60 range.
(Additional reporting by Chyen Yee Lee and Clare Jim; Editing
by Lincoln Feast)

PREVIEW-AIA seen up 11 pct on debut after record HK IPO