JPMorgan says Prudential PLC's (LSE:PRU) recent share-price slide has already baked in a bearish view of China-related insurance flows, leaving the Asia-focused insurer looking inexpensive even under a tougher regulatory scenario.
The broker, which rates Prudential at Overweight, noted that the shares have fallen more than 10% since concerns emerged over Decree 837, a regulation whose implications for Hong Kong insurance sales to Mainland Chinese Visitor customers remain unclear.
Analyst Farooq Hanif, in a note, said the key question is whether investment-linked insurance products will fall within the scope of the decree, which now incorporates individual investors.
“Our view is that this is a bear case scenario, and we still believe clarification on this matter could be positive for Pru,” Hanif said. The market, JPMorgan argues, is treating the regulatory risk as though the downside case has already landed, while giving little credit for possible management responses.
“However, we argue that even in a bear case, the shares look inexpensive – and the market is ignoring mitigating actions,” the analyst added.
