Bullish Bets on AIA Climb to 2011 High Before Earnings: Options
By Jonathan Burgos and Kana Nishizawa
(Bloomberg) — Bullish bets on AIA Group Ltd., Asia?s
third-largest insurer by market value, climbed to the highest in
four years on speculation shares will rally after the company
reports results.
Calls that pay out if AIA advances 10 percent cost 1.6
points more than puts betting on a decline, according to three-
month options data compiled by Bloomberg. The gap widened to 2.9
points on Feb. 23, the most since January 2011, the data showed.
AIA shares have advanced 11 percent since the company announced
third-quarter results on Oct. 17 and are within 0.3 percent of
last month?s record high.
?The value of new business growth for AIA has been very
impressive,? said Sam Le Cornu, who oversees about $3 billion
in Asian equities at Macquarie Funds Management in Hong Kong.
?The trend is healthy and there?s always room to surprise on
the upside.?
AIA is expected to report on Thursday adjusted net income
of $3.17 billion for the 12 months through Nov. 30, compared
with $2.82 billion the previous year, according to the average
of 15 analyst estimates compiled by Bloomberg. It will post a
21.7 percent increase in new business value, according to the
median prediction in a separate survey of five analysts.
?We expect the result to be strong,? Credit Suisse Group
AG analysts Arjan van Veen and Frances Feng wrote Feb. 12 in a
report, noting AIA?s investment holdings will benefit from
rallies across Asian equity markets in the second half of the
year and the company is posting strong growth in Hong Kong and
China. On the other hand, the insurer reports in the U.S.
dollar, which is strengthening against Asian currencies. That?s
a headwind for the first quarter of the 2015 fiscal year, they
wrote.
Shares Rally
AIA rose 1.4 percent at the midday break in Hong Kong on
Wednesday, extending its advance this year to 7.2 percent. It
traded at 19 times its projected earnings over the next 12
months on Tuesday, compared with a five-year average of 16.4 and
a multiple of 11.5 on the Hang Seng Index.
The Hang Seng Volatility Index slid 0.6 percent today,
declining a second day. Implied volatility, used to gauge the
cost of options, for three-month contracts with an exercise
price 10 percent above AIA shares was 23.1 yesterday, compared
with 21.5 for those with a strike 10 percent below, according to
data compiled by Bloomberg.
After the quarterly results in October, China International
Capital Corp. and Sanford C Bernstein & Co. increased their
target prices on the stock, Bloomberg-compiled data show.
Goldman Sachs Group Inc. and HSBC Holdings Plc did the same
after the half-year figures in July.
?People are speculating stronger-than-expected earnings,?
said Steven Leung, director of institutional sales at UOB Kay
Hian Ltd. ?Since their listing they?ve been delivering strong
results, and after their results announcement, share prices
usually move up because of upward revision by brokers. So people
may be trying to take advantage of that.?