HONG KONG: Shares of China Strategic soared over 78 percent yesterday when two household names in the finance community were added to its senior management team, following a deal to acquire Taiwan's Nan Shan Life Insurance.

The company said yesterday that it had appointed Frederick Ma Si-hang, the ex-investment banker who was also former Secretary for Commerce and Economic Development of Hong Kong, as its chairman, replacing Chiu Ching Ching.

Meanwhile, Raymond Or Ching-fai, formerly Hang Seng Bank's Chief Executive Officer, has been appointed as CEO, replacing Yeung Kwok-yu, the company said.

The management reshuffle followed China Strategic's announcement on October 13 that it had agreed to acquire 97.57 percent of Nan Shan Life Insurance Co Ltd from American International Group Inc (AIG) for US$2.15 billion, with a partner.

China Strategic will own nearly 80 percent of Nan Shan Life while Primus Financial Holdings Ltd, an Asia-based financial services holding firm, will hold a stake of about 20 percent of the insurer if the deal goes through, according to the acquisition agreement.

Shares of China Strategic soared 78.38 percent, or HK$0.29, to close at HK$0.66 after resuming trading yesterday. The stock had been suspended from trading ahead of its acquisition announcement.

"The stock soared on the celebrity effect. Many investors traded the stock on hopes that the company will have greater business prospects under the management of Ma and Or," said Patrick Shum, President of BMI Funds Management. However, Shum cautioned investors against being too aggressive in trading the stock, as the sharp gain may trigger heavy profit-taking soon.

He also noted the potential dilution effect on China Strategic's earnings per share (EPS) as the company has proposed to sell new shares at HK$0.10 per share and convertible notes with a conversion price of HK$0.10 to raise funds for the acquisition.

Thomas Ng, investment strategist at Quam Securities, also voiced caution. "Investors should be careful in trading the stock, as its share price has skyrocketed on speculative trading," he said.

However, BMI's Shum is positive views about China Strategic's long-term outlook. "If the company successfully acquires and smoothly runs Nan Shan Life, its business outlook should be brighter as the latter is one of the biggest life insurers in Taiwan."

Despite the fact that the deal is still subject to approval by Taiwan's authorities and China Strategic's shareholders, newly appointed CEO Raymond Or said yesterday he was confident the deal would win regulatory approval from Taiwan authorities. He added the company hopes to expand its insurance business to the Chinese mainland and Vietnam after the acquisition.

However, there is still concern that the deal may face some legal challenges. Taiwan's China Trust Financial Holding Company Ltd earlier threatened to sue AIG for rejecting its better offer for Nan Shan Life in favor of China Strategic's "less favorable" offer. Nan Shan Life is one of the largest life insurers in Taiwan, with total assets exceeding $46 billion and 7.9 million in-force policies held by about 4 million policyholders.

(HK Edition 11/11/2009 page3)