Share price of initial public offering:

$18.68

Share price now:

$23.72

Change:

27.0%

Volume:

39.9 million shares

Last time this high:

All-time high

Intraday high:

$25.20

Intraday low:

$22.00

Forward P/E before announcement:

n/a

Forward P/E after announcement:

n/a

LET A BILLION

insurance policies bloom.

With apologies to Mao Tse-Tung, who wouldn't have understood, that's what investors around the world were hoping for Wednesday as they clamored for a slice of China Life Insurance, the year's biggest initial public offering.

The promise of selling coverage to a growing proportion of China's 1.3 billion citizens with income worth insuring raised $3 billion in equity financing on the Hong Kong and New York markets. And that was just for starters: China Life's American depositary receipts rose 27% during their first day of trading from the $18.68 offering price.

The Beijing-based company is the dominant player in China's small, but fast-growing, insurance market. In addition to its 45% share of the life-insurance segment, it provides 69% of the country's accident insurance and 34% of its health insurance coverage.

After ringing the opening bell at the New York Stock Exchange this morning, China Life Chief Executive XianZhang Wang mentioned in an interview with CNBC that only 1.5% of China's people have insurance. Some analysts expect premiums to rise at a compound annual rate of 30% over the next three years.

"The rising wealth levels in China are good for this kind of company, and the fundamentals should be supported by demographics," says Raymond Lin, a portfolio manager with Tricera Capital, a San Francisco hedge fund and investment firm specializing in Asian equity markets.

All those impressive statistics have stoked quite a boom in shares of Chinese companies this year, in what the faithful hope are early days of a trend and skeptics deem the later stages of a bubble. Web portals have blazed this path, with Netease.com up 231% in 2003 and Sohu.com 350% higher. Chinadotcom has rallied 187% and Sina 401% this year.

"Certainly, this is a very substantial change for IPO investors," says David Menlow, president of IPOfinancial.com, a research firm in Millburn, N.J. "Because for the last few years, investors have not been able to latch on to a specific sector as something that has been tested and shows promise. It has been about individual stocks across a plethora of sectors."

Menlow points to Ctrip.com International, a Chinese online travel agency whose stock soared 88.5% during its first day of trading this month, the best market debut since November 2000. Now China Life has matched Ctrip's momentum with sheer size, confirming China's status as a proven money magnet.

For some investors captivated by the outsized demographics and the equally massive recent capital gains, "Made in China" is becoming reason enough to buy.

"It's not wise decision making," says Menlow, "but that's where the conventional wisdom will turn." (Menlow doesn't own shares of China Life Insurance; IPOfinancial.com doesn't do investment banking.)

Then again, even those who crunch the numbers may end up investing on faith. "The problem with any Chinese financial institution is that the level of transparency is not up to Western standards," says Tricera Capital's Lin. "And there is the risk of nasty surprises on the balance sheets of these companies."

What's true for Enron goes double for ex-communist managers not raised on rhetoric about enhancing shareholder value.

"With China Life, the management will be superior to the run-of-the-mill company," says Lin. "Still, there is as much risk for negative surprises in China as there would be in any emerging market."

China Life's IPO prospectus acknowledges as much, listing risks such as excessive regulation and the possibility that its state-owned parent could demand higher dividends or sell more shares from the majority stake it will retain. For now, there has been no shortage of buyers.

Quote:
"The whole 1.3 billion people argument has always been the reason for positive sentiment in China," says Lin of Tricera Capital. "But you have to remember per-capita GDP there is $1,000. And a large percentage of that 1.3 billion people have other things to worry about besides life insurance, like putting food on the table. Over a period of years, the argument will probably come true, but it won't happen instantly." (Lin doesn't own shares of China Life Insurance; Tricera Capital doesn't have an investment-banking relationship with the company.)