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China Mobile hits its target in tepid Shanghai IPO

China Mobile can claim its return to the Shanghai main board a success, achieving its initial 48.7 billion yuan ($7.6 billion) target.

But despite a 9.4% spike in early trading, the massive IPO – the biggest both in China and the telecom industry for more than a decade – did not excite investors. On the second day trading the stock closed at 58 yuan, a smidge above the issue price of 57.58 yuan.

The stock is bolstered by strong buy orders at the issue price as well as the anticipated green shoe offering that will raise an extra 8.1 billion yuan.

Low footfall: China Mobile's IPO - the biggest in both China and the telecom industry for more than a decade - has failed to inspire investors.
  (Source: Sipa US / Alamy Stock Photo)
Low footfall: China Mobile's IPO - the biggest in both China and the telecom industry for more than a decade - has failed to inspire investors.
(Source: Sipa US / Alamy Stock Photo)

The offering was backed by 19 corporate investors, mostly state-owned, and was 800 times over-subscribed.

Hong Kong surprise

But the biggest factor weighing on the share price is likely its Hong Kong stock. On the eve of the Shanghai listing China Mobile announced a buyback of up to 2.05 billion Hong Kong shares, or 10% of the total stock, driving the Hong Kong price 3.3% higher. It closed at HK$49.15 Wednesday, more than 30% below the Shanghai mark.

It is routine for dual-listed Chinese stocks to trade at higher prices on mainland exchanges than in Hong Kong, but this is a particularly steep surcharge.

As a columnist in Beijing Business Today put it, it is for the same reason that wealthy people buy luxury goods overseas – they are much better priced there.

"For the same stock, why abandon the cheaper one and buy the expensive one?" he wrote. A lot of investors clearly had the same thought, dumping 756 million yuan in orders ahead of the IPO – a record for 2021.

Follow me follow

China Mobile appears to be treading in the path of rival China Telecom, which re-established itself on the Shanghai exchange in August. Both operators were ejected from the NYSE early this year on national security grounds.

While China Telecom raised 48 billion yuan and enjoyed a 35% bump on the first day, it has since underwhelmed, trading for the past month at around 5% below its initial price.


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Individual investors may not be impressed, but execs at neither operator will lose sleep over that. They have met their fundraising targets and performed their patriotic duty by returning onshore. The strong level of institutional support confirms, if there were any doubt, that China has ample depth to bankroll its telecom infrastructure.

But for now and the long foreseeable future it is a space for Chinese only. Non-Chinese telecom firms weighing their options should look elsewhere.

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— Robert Clark, contributing editor, special to Light Reading

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