UBS: Zhongan Online (06060) recently increased due to Hong Kong's adoption of a draft stablecoin to maintain a target price of HK$13.1

The Zhitong Finance App learned that UBS released a research report saying that the Hong Kong Legislative Assembly of Zhongan Online (06060) passed the “Stablecoin Bill” in the third reading on Wednesday (21st) to establish a licensing and supervision system for “fiat stablecoin issuers.” Treasury Director Xu Zhengyu said he is seeking implementation of the system within this year and is drafting regulatory guidelines. The main scenario for stablecoins is cross-border payments, and he is open to establishing mutual recognition mechanisms with overseas financial regulators. UBS maintains Zhongan Online's target price of HK$13.1.

UBS said that in the five trading days after the Hong Kong Legislative Council passed the stablecoin law, the stock price of Zhongan Online increased by 29%, believing that the bill removed barriers to selling stablecoins to the public. The Hong Kong Monetary Authority has launched a regulatory “sandbox” for stablecoin issuers, and RD InnoTech, the company in which Zhongan indirectly holds 8.7% of the shares, is one of the three participating institutions. The market expects Zhongan to benefit from the following two aspects: 1) the potential increase in RD InnoTech's valuation; and 2) a significant net interest spread.

The value of stablecoins is usually linked to other assets (such as fiat currency, gold) to maintain price stability. If users want to issue stablecoins, they need to deposit an equivalent amount of fiat currency with the issuer. Due to limited initial competition (only 3 sandbox participants), deposit interest rates may be as low as current deposit levels, which means that the capital costs of Zhongan Bank are lower. As the number of stablecoin issuers increases in the future, deposit interest rates may gradually rise. However, ZhongAn believes that the stablecoin market may also expand significantly. Currently, the market value of USDT (a stablecoin backed by the US dollar) exceeds 150 billion US dollars. Users are mainly used for transactions (such as trading Bitcoin without a fiat deposit and withdrawal process) and cross-border payments.

According to UBS, in the first 4 months of 2025, Zhongan Online's total premiums increased 13% year over year. Among them, health insurance premiums increased by more than 40%, mainly due to lower traffic acquisition costs, increased marketing efforts, and new product launches. Auto insurance premiums increased by more than 30% year over year. As regulations strengthened commission restrictions on offline distribution channels (such as brokers), Zhongan focused on online channels. The consumer finance business is also recovering, in line with industry trends.