HONG KONG • AIA Group shares slumped after China UnionPay halted credit and debit card payments for most insurance policies in Hong Kong, as regulators cracked down on capital outflows from China.
AIA shares tumbled 4.8 per cent yesterday, the biggest decliner in the stock market.
UnionPay will suspend the use of its cards by Chinese nationals to pay for all Hong Kong insurance except for accidents, medical coverage and tourism, Bloomberg News reported last Friday.
About 50 per cent of fiscal first- half sales by AIA's Hong Kong unit were generated from Chinese visitors, AIA chief executive officer Mark Tucker said in July.
Prudential, which fell 1.9 per cent in London on Friday, lost 2.4 per cent in Hong Kong yesterday.
The latest curbs will affect more than 20 per cent of AIA's annualised new premiums, a gauge of new policy sales, in Hong Kong, analysts from China International Capital Co (CICC) estimated.
The new restrictions effectively disallow the purchase of almost all kinds of policies with UnionPay cards, including the popular health policies that usually contain a savings component, CICC said.
Mainlanders may resort to paying for smaller policies with cash, using local bank accounts or Visa and Mastercard, it added. Those methods of payment are more expensive or less convenient, Credit Suisse Group analysts said in a client note.
AIA complies with all guidelines in the processing of applications of life insurance by Chinese visitors in Hong Kong, the company said.
Sales of insurance to Chinese visitors in Hong Kong have surged since August last year, when a surprise devaluation of the yuan, the first since 1994, stoked fears of a further weakening in the currency and led citizens to move money offshore.
China has been progressively tightening rules governing Hong Kong insurance sales to mainland residents as part of its attempts to curb capital outflows.
Still, Chinese visitors bought a record HK$16.9 billion (S$3 billion) worth of insurance and related investment policies in the three months through June, according to numbers released by the Office of the Commissioner of Insurance in Hong Kong.
Mainlanders have been flocking to Hong Kong to buy insurance policies, which typically come with better service and also offer a way to skirt controls on how much capital they can move abroad.
Chinese buyers had used multiple swiping of credit cards to move money overseas through the purchase of insurance policies.
Curbs on their use by those living on the mainland were introduced this year to curb the practice.
The UnionPay move is unlikely to reduce China's capital outflows by a significant amount, Goldman Sachs analysts led by MK Tang wrote in a note yesterday.
The bank estimated capital flight from China accelerated to almost US$80 billion (S$111 billion) in September, with a similar or larger number last month amid a weakening yuan. Further capital account restrictions may lead to greater outflows as Chinese households move money through unregulated channels, the Goldman Sachs analysts wrote.