JPMorgan has released a research report stating that shares of AIA (01299) experienced a significant pullback yesterday (the 4th) due to market concerns over some Hong Kong banks suspending account openings for mainland clients. However, the firm believes current market worries overgrowth prospects for Hong Kong's Mainland China Visitor (MCV) segment are excessively discounted, and there are currently no specific new regulatory policies targeting MCV sales activities. JPMorgan maintains its "Overweight" rating on AIA with a target price of HK$112.

The firm's analysis suggests that while the Hong Kong MCV business remains relevant, valuation analysis indicates Hong Kong clients constitute only a minor portion of AIA's future growth value. JPMorgan anticipates that a combination of factors will help rebuild market confidence. These include AIA's upcoming strong first-half results, official commentary on MCV regulation expected in August, a recovery in monthly premiums in Thailand, and positive momentum from upward revisions to New Business Value (NBV) forecasts for mainland Chinese insurers in the first half. Consequently, the firm advises investors to consider buying on dips.

Key Points on Valuation and Risk

JPMorgan notes that the market currently appears to be pricing in more severe risks, such as restrictions on mainland clients opening accounts in Hong Kong. However, the impact of Hong Kong business risks on its target price is limited. In its detailed valuation for the target price, future growth expectations from mainland China contribute HK$18, ASEAN and other markets (including India) contribute HK$19, while Hong Kong contributes only HK$14. Even if the embedded future growth expectation for Hong Kong were halved, the adjustment to the target price would be just 6%. The firm believes that if the share price corrects further below 1.0 times the expected Price-to-Embedded Value (P/EV), which equates to HK$72.5, investors would re-evaluate the stock. JPMorgan forecasts that AIA's New Business Value will grow by 13%, 19%, and 17% year-on-year for the fiscal years 2026, 2027, and 2028, respectively.