The listing document notes that HSBC is 'assumed' to be ready to buy shares worth HK$1.49 billion, leaving it with a 9.9 per cent equity stake, while other major shareholders will allow their holdings to be diluted during the IPO.

HSBC's insurance subsidiary now holds 10 per cent of Ping An, for which it paid US$600 million in November 2002. Goldman Sachs owns 6.87 per cent and an affiliate of Morgan Stanley holds 5.87 per cent. The largest existing shareholder is Shenzhen Investment Holding Corp, owned by the municipal government, which holds 12.49 per cent.

All existing shareholders have the right to subscribe to additional Ping An shares to maintain their stakes, which would otherwise be diluted by the new shares.

Both Goldman Sachs and Morgan Stanley, which invested in Ping An in the mid-1990s, have waived their right to buy more shares. As a result, their post-IPO holdings will be diluted to 5.47 per cent and 4.67 per cent, respectively. Similarly, Shenzhen Investment will allow its stake to be diluted to 8.77 per cent after the IPO, leaving HSBC's insurance subsidiary as the new largest shareholder.

Henderson Land Development chairman Lee Shau-kee has also decided to invest in Ping An, according to company deputy chairman Colin Lam. Mr Lam said the size of Mr Lee's stake would depend on final pricing, but added Mr Lee typically made equity investments worth 'hundreds of millions' of Hong Kong dollars.

At the launch of the IPO roadshow yesterday, Ping An offered a price range of HK$9.59 to $11.88 a share, or 23 to 28 times this year's forward earnings of 2.76 billion yuan. HSBC paid $9.50 per share for its stake.

According to the preliminary prospectus, the firm expects profits this year of at least 2.76 billion yuan, an 18 per cent increase from the 2.32 billion yuan posted last year.

Some fund managers said the shares were pricey, noting China Life Insurance shares traded at a price-earnings ratio of 19. Observers also pointed out that Ping An could be vulnerable to the same corporate governance risks that had dogged China Life since its listing last year, as both are state-owned companies with little history of compliance to modern norms of corporate transparency.

Ping An is selling 22.4 per cent of its enlarged share capital.

Of the total shares on offer, about 95 per cent, or 1.31 billion shares, will be sold to institutions through the international tranche. Only 5 per cent, or 69.39 million shares, will be available to local retail investors.

Book-building for the international tranche started yesterday and will close at the end of next week. The retail offer for up to HK$824.41 million will run from next Monday to Thursday. Pricing was expected next Thursday, with trading to begin on June 24, fund managers were told yesterday.

Of the HK$12.86 billion in expected net proceeds, about 70 per cent would go towards strengthening the company's capital base, meeting future solvency requirements, business expansion and potential strategic transactions and general corporate expenses.