According to a recent research report, AIA (01299) shares have experienced significant volatility over the past two weeks, declining 7.5% (compared to a 2.2% drop in the Hang Seng Index) primarily due to market concerns over tightening cross-border regulations.

The report suggests that while risks related to Mainland Chinese Visitors (MCV) may persist for some time and create uncertainty, they are now largely reflected in the stock price. The recent price decline has triggered a reassessment of the risk-reward profile. The stock currently trades at 1.1 times the projected 2027 price-to-embedded-value (P/EV), nearing historical lows. This valuation reflects a limited market assessment of its future growth potential, which appears overly conservative.

The report reiterates an Overweight rating on AIA and maintains a target price of HK$112.

The report indicates that the market focus is no longer on whether MCV risks exist, but rather on whether the market is excessively undervaluing AIA's broader growth and cash generation capabilities. Since MCV business accounts for only 21% of the group's new business value, the performance of the remaining nearly 80% non-MCV business remains largely on track.

It is projected that, supported by a diversified market footprint and strong demand in key Asian life insurance markets, the non-MCV business is expected to achieve double-digit financial growth.

Furthermore, India has become a significant long-term growth engine for the group. Its subsidiary, Tata AIA, has already surpassed USD 1 billion in new life insurance sales (APE) for 2025. Based on AIA's 49% stake, this scale is already comparable to the market opportunity presented by Hong Kong's MCV segment.

The report maintains its forecasts for AIA's post-tax operating profit growth in the 2026 and 2027 fiscal years at 10% and 12% year-on-year, respectively.

Although the report expresses a relative preference for CHINA LIFE (02628) and PING AN (02318) within its Overweight list ahead of the summer earnings season, it notes that AIA's historically low valuation should limit its downside potential.