Tong Yang skids on debut

Fall of 17% is reversal of strong share orders for Korean insurers

WSJ Fri-Sun, Oct 9-11, 2009

Tong Yang Life insurance co. tumbled 17% on its trading debut on the Korea Exchange despite strong demand for its shares during order-taking, in a second sign of souring sentiment toward initial public offerings in the country.

The company is the first Korean life insurer to enter the market after the government in 2007 eased restrictions for life insurers to list publicly. The offering was subscribed by almost 13 times last week, as retail investors showed keen interest.

But signs of investor fatigue were becoming evident earlier this week, as spirit maker Jinro Ltd. was forced to lower its IPO price to 41,000 per share, below an indicative price range of 45,000 won-50,000 won. The indicative range had been itself reduced from 54,000 won-to 60,000 won due to lack of interest.

Some said Tong Yang's disappointing debut may not bode well for some of peer companies that alos are considering IPOs.

Tong Yang Life raised 340.38 billion won ($291.4million) from the IPO, making it one of the country's largest new listings in recent years. Share ended the first day at 14,150 won, compared with its IPO price of 17,000, already the bottom of the proposed range of 17,000 won to 22,000 won. The day's drop was frar steeper than the 4.5'% fall in the Kospi index since the IPO was priced on Sept. 25. The Kospi closed at 1615.46 Thursday, up 1.1% on the day.

Stephanie Hahn, an anayyst at Woori Investment & Securities, pegged the appropriate share price for Tong Yang at between 12,000 won and 15,000 won based on a fair price-to-book ratio of 1.8 times.

"Since it was the first life insurer, investors had been, more than eager, driving up the price," during subscription, said Park Yoon-young, an analyst at HMC Investment & Securities.

Mr.Park said Tong Yang's performance will serve as a guide for the pricing of future IPOs in the sector.

With the domestic stock market up 44% so far this year, more life insurers are expected to launch IPOs from next year to replenish capital and support growth.

Next in line is Korea Life insureance, the country's second-largest life insurer by total premiums. Korea Life is majority-owned by Hanwha Group, whose chairman, Kim Seung-youn, said in September that a listing plan is in motion.