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Hot sector – Trading and tracking Insurance stocks for opportunities

Fri 11 Jan 2019

It was reported by the media (Edge Daily Online) that Finance Minister Lim Guan Eng has come out to say that Singapore insurer Great Eastern Life Assurance (Malaysia) Bhd is exempted from Bank Negara Malaysia’s (BNM) ruling on foreign ownership of local entities.

Great Eastern is granted the exemption as it has pledged a minimum RM2 billion contribution to a health scheme for the bottom 40% of the population (B40).

In his Budget 2019 speech on Nov 2 last year, Guan Eng had announced that Great Eastern had agreed to contribute the initial seed funding of RM2 billion to this fund, which will be managed by BNM.

He added that other foreign insurance companies which contribute to the scheme will also be exempted from having to reduce their equity.

The B40 Health Protection Fund is an initiative piloted by the federal government in partnership with the private insurance industry.

Under the scheme, the government together with private insurers will provide free protection against the top four critical illnesses and up to 14 days of hospitalisation benefits starting in January this year.

At the time, the report said that the media reported that insurers which had not reached the shareholding spread were looking to pare their stake amid the regulation, including through direct sale or initial public offerings.

These included names like Tokio Marine Holdings plc and Prudential plc, the latter of which reportedly sought a share sale to raise US$700 million, according to Bloomberg.

Local funds like Kumpulan Wang Persaraan (Diperbadankan) and the Employees Provident Fund had also expressed interest to buy into certain insurers, including Great Eastern at that time, the report added.

With newsflow potentially rising in the sector, several research houses incidentally have been calling for overweighting the sector due to its defensive nature amidst a volatile market environment.

Companies in the insurance business, traditionally shunned for being unexciting, featured prominently in several December strategy reports of research houses according to a media report.

Another research house said that insurance is the fastest growing segment in the services sector in the first three quarters of 2018.

It expects the trend to continue in 2019, boosted by further liberalisation of the industry and several government’s initiatives aimed at increasing take-up rates.

Are there any opportunities for insurance stocks at the current market juncture?

Which stock is a good trading opportunity upon crossing their critical price threshold level with increased volume and investors’ participation?

What is the current market rating for the insurance sector and stocks in the sector?

Follow our analysis further at mPower Algorithm and mPower Trading as we track the movement and look at one particular insurance stock which is likely to provide the greatest double-digit upside.

Insurance sector current trading outlook

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Note: Certain info presented in the tables above has been redacted to comply with the agreement with elite members of the mPower Algorithm program and mPower Trading program and certain institutional clients. The above analysis reflects our personal view only and is subject to terms of use. Please refer to the full report inside for the complete info.