China Mobile investors jittery over Apple deal
Options traders pushed the cost of hedging against declines in shares of China Mobile to an almost two-year high, concerned an expected agreement to sell Apple's iPhone may hurt profit.
Puts protecting against a 10 per cent drop in the world's biggest phone company by users cost 2.17 points more than calls betting on a 10 per cent gain. The price relationship known as skew rose to 3.78 on September 4, the highest level since November 2011. The shares gained 17 per cent from a low on June 20 last week and were within 4 per cent of a January high.
Apple, which unveiled its iPhone 5c and 5s models on September 10, is close to agreeing a distribution deal with China Mobile, a person with knowledge of the matter said this month.
Analysts have questioned whether the price of the iPhone 5c on the mainland - more than the equivalent of US$700 because of tariffs - will be too expensive for customers. Competitors China Unicom (Hong Kong) and China Telecom, which subsidise iPhone costs for users, started selling the new handsets on Friday.
"If it ties up with Apple, China Mobile could increase its number of customers but at the same time there are concerns it may weigh on profits because of things like subsidies," Mari Oshidari, a strategist at Okasan Securities said. "Investors are also preparing for downside as shares are now trading near January highs."
The lowest-priced iPhone 5c, with a plastic shell coming in five colours, will sell for 4,488 yuan (HK$5,650) almost equivalent to two months' pay for an urban worker. Investors had expected the 5c to be cheaper to appeal to more customers in emerging markets, said Brian Blair, an analyst at Wedge Partners.
The company added 5.45 million customers last month, it said yesterday.
China Mobile shares rose 0.2 per cent to HK$88.20 in a shortened trading session yesterday.
The stock had been rising along with the broader market, and in anticipation it would announce a deal with Apple soon, Ricky Lai, an analyst at Guotai Junan International said last week.
With the new iPhones being more expensive than expected, investors were becoming concerned about the subsidies China Mobile would have to provide if they were to strike a deal, Lai said.