Asian Alliance market cap triples in a month to Rs. 14.3 b

Asian Alliance Insurance Plc, which is centre of attraction for both active market players and regulators, has seen its market capitalisation triple in just a month, despite being in the price band twice during the period.

It opened September at Rs. 119.80 per share with a market capitalisation of Rs. 4.5 billion and yesterday it had rocketed to a high of Rs. 394.30 before closing at Rs. 380.90 with a market cap of Rs. 14.28 billion. The increase in a month is a massive 218% as Asian Alliance has been bettering its all-time high prices in recent weeks.

Yesterday’s peak surpassed last week’s high of Rs. 384.70. Its net asset per share is only Rs. 41.62 as per 2010 accounts whilst in the first half of 2011, Asian Alliance, a 74% stake of which was recently acquired by Softlogic Holdings for Rs. 3.3 billion, had suffered a Rs. 172 million loss as against a profit of Rs. 79 million in the corresponding period of last year.

          However, those who bought Asian Alliance last year and are selling today will make a fortune. Asian Alliance closed the calendar year 2010 at Rs. 80.20 whilst it market capitalisation was an insignificant Rs. 2 billion.

In its rising value, Asian Alliance has zoomed to 41st position in the most valuable ranking, relegating the sounder stocks such as NTB, DIMO, Seylan Bank, Lanka Ashok and LIOC as well as the bigger insurers Aviva NDB, Janashakthi and Union Assurance to lower ranks.

Only Ceylinco Insurance is above Asian Alliance in terms of market capitalisation, but the latter might overtake the industry giant’s value of Rs. 15.49 billion soon if the ongoing frenzied trading continues.

The market yesterday saw slightly over half a million of Asian Alliance change hands via 888 trades for Rs. 218 million, accounting for the second largest turnover. Last week 1.9 million shares of Asian Alliance traded for Rs. 507.8 million via 3,540 trades before finishing the week up Rs. 157.

The previous week 2.57 million shares traded for Rs. 386 million with price up Rs. 76.20.

Most analysts confirm fundamentals don’t warrant this astronomical price of Asian Alliance, but it is sheer speculative play not on rumours but purely on the fact that high net worth investors are engaged in its trading.

The rise has baffled as well as angered regulators who are burning the midnight oil to spot any manipulative practices, but the bottom line is that there is a willing buyer and seller irrespective of whether prices are highly unrealistic or not.