China Mobile eager to list on the mainland market
- Source: Global Times
- [01:20 November 18 2009]
- Comments
By Cong Mu
Wang Jianzhou, chairman of China Mobile, said Monday in Hong Kong that the company has begun preparing for a listing on the upcoming international board in Shanghai, Hong Kong media reported Tuesday.
Because the regulators are still formulating the rules for the new board, it is hard to say when the preparations will be done, said Hong Kong Economic Times citing Wang, after previous media reports said the country's largest telecom carrier would choose to issue the yuan-denominated A shares or Chinese Depository Receipts.
The government has long been planning to let overseas-listed State-owned enterprises (SOEs) return to the mainland stock market, and the listing of China Mobile will serve as a model for other SOEs, said Zhang Chenhao, an analyst with Shanghai-based JLM Pacific Epoch.
China's top regulators openly expressed their support for China Mobile's return in 2007, but the plan was shelved due to tepid market conditions and the stoppage of initial public offerings after the financial crisis.
The high average price/ earning (P/E) ratio of mainland stocks is one of the reasons the so called red chip (overseas-registered and listed) SOEs are interested in the market, according to experts.
Although it is more convenient for firms to raise funds in Hong Kong and the US, the artificially high P/E ratio caused by the limited stock supply makes it much cheaper for the red chips and foreign companies to issue stocks on the mainland, because they would need to issue less shares to get the same amount of money, said Liu Shengjun, deputy director of CEIBS Lujiazui International Finance Research Center.
The average P/E ratio on the Shanghai Stock Exchange Friday was 28.46, while China Mobile's P/E ratio in Hong Kong was 11.66 Tuesday, when the telecom operator's share price closed up 0.34 percent, at HK$74.35 ($9.59).
Chinese people have limited places to put their money, so the stock market becomes a major investment channel.
The savings' share of household financial assets declined from 70.4 percent in 2005 to 29.7 percent in 2007, while securities-related investment's share increased from 3.6 percent to 40.8 percent over the same period, according to a research report released by Nomura Securities November 9.
The Japanese investment bank estimated that Chinese households' financial wealth will increase by 23.4 trillion yuan ($3.4 trillion) between 2009 and 2011, with 11 trillion yuan ($1.6 trillion) flowing to the richest 20 percent of the population, who are more inclined to invest.
The telecom sector's performance has been lackluster in recent years. One of the drags on the telecom operators' performance is the huge capital expenditure on the third generation (3G) network.
China Mobile, China Telecom and China Unicom have invested a total of 96.1 billion yuan ($14.1 billion) in 3G projects so far this year, according to the Ministry of Industry and Information Technology.
The investment will inevitably hurt the telecom companies' profitability because they are still rolling out their 3G networks and no return will be seen in the short term, Zeng Jianqiu, professor at Beijing University of Post and Telecommunications, told the IT Times Monday.
According to some early results, the 3G products are more profitable than expected, and China Mobile is expected to outperform the other two because of its experience in providing mobile communication services, Zhang of JLM said.
