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Monday, October 28, 2019, 18:03
Hong Kong turmoil slams AIA as mainland visitors decline
By Bloomberg
Monday, October 28, 2019, 18:03 By Bloomberg

The AIA Central building, home to the headquarters of AIA Group Ltd, stands in the business district of Central in Hong Kong, on July 23, 2014. (BRENT LEWIN / BLOOMBERG)

More than four months of turmoil in Hong Kong and the chilling effect on Chinese mainland tourism to the city have taken their toll on insurer AIA Group Ltd, with policy sales slumping.

The value of new business of its largest unit, a measure of future profitability of new policies, fell by double-digits in the third quarter, AIA said in a statement to the local stock exchange Monday

The value of new business of its largest unit, a measure of future profitability of new policies, fell by double-digits in the third quarter, AIA said in a statement to the local stock exchange Monday.

Separately, HSBC Holdings Plc said Monday the change in Hong Kong’s economic outlook led to a US$90 million charge, even though its overall performance in the city remains “resilient.”

READ MORE: HSBC profit misses estimates as bank abandons profitability goal

While AIA didn’t give an exact figure for the slide in Hong Kong, it said the group’s overall value of new business was little change in the quarter at US$980 million. Excluding Hong Kong, new business value rose 14 percent.

Still, shares rose on relief that growth in other markets offset the declines in Hong Kong, and new business margin expanded.

New business to Hong Kong residents actually rose. But that was wiped out by the decline in sales to mainland visitors, which “broadly tracked” the drop in overall visitor arrivals to the city in July and August, the company said.

Mainland visitors buy policies in Hong Kong as a way to move capital offshore in times of economic uncertainty and expected currency weakness. The yuan depreciated by nearly 4 percent in the quarter.

AIA struck a cautious note about its outlook: “Some of our markets are experiencing headwinds from the lower interest rate environment, falling consumer confidence and rising political and trade tensions,” it said, adding that the reduced numbers of mainland visitors to Hong Kong "continue to affect sales".

ALSO READ: Survey: One-third of HK's businesses expect worse Q4

The figures were released more than two weeks early after AIA became aware that information was circulating purporting to relate to the financial performance of one unit. That information was “incomplete” and inaccurate, it said.

AIA shares rose as much as 4.2 percent in Hong Kong trading Monday, taking this year’s gain to 20 percent.

The third-quarter new business value was better than expected, said Bloomberg Intelligence analyst Steven Lam, with the strong sales to Hong Kong residents encouraging.

The announcement offered some clarity on the impact of Hong Kong protests on the company, the biggest question on the minds of investors, CGS-CIMB Securities analyst Michael Chang said.

Growth in markets including the Chinese mainland, Malaysia, Thailand and Singapore helped cushion the fallout from the Hong Kong protests, Lam said.


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