The forthcoming flotation of China Telecom (Hong Kong) has become a test case for the Hong Kong stock exchange's determination to crack down on listing candidates which leak confidential information prior to listing approval. Issue sponsors Goldman Sachs (Asia) and China International Capital Corp (CICC) issued a strongly worded announcement in yesterday's press saying information about the listing had been disseminated to the press. The sponsors said the leak had been made through 'improper channels'. This followed a meeting in Shenzhen last Wednesday at which selected analysts in the underwriting syndicate were allegedly given confidential details about the float. The exchange's listing division executive director, Lawrence Fok Kwong-man, speaking in Chengdu, said the exchange had 'taken action' after finding out about the leak. He said it was the first time the exchange had taken action against an information leak before a listing application had been ratified. Mr Fok refused to say whether China Telecom would be held responsible for the leak. The Goldman Sachs-CICC statement said: 'Neither the sponsors nor the company have authorised the release to, or use by, the press of such confidential information.' The Companies Ordinance requires all listing candidates to only provide their information in prospectuses and not to the public through the media. In May, the exchange sent a letter to all merchant bankers warning it would postpone approval of an initial public offering (IPO) for a month if important information was leaked to the market before listing approval was given. 'Information leaked out to the market is likely to put pressure on the listing committee to make a decision on the flotation and that is not what we would like to see,' Mr Fok said. He said the information leak to certain market participants or media would cause some people to get more information than others, creating an unfair advantage. Officials from Goldman Sachs and CICC were not available for comment yesterday. Asked whether the leak could delay the float, Rowena Ng, assistant director of China Development Finance Co (Hong Kong), said: 'We have so far received no notice from Goldman Sachs and CICC about any delay.' She said the matter would hinge on whether the exchange found the sponsors had deliberately leaked information. China Development Finance is one of the leading underwriters of China Telecom's international placement for Hong Kong and Asia. China Telecom, the proposed Hong Kong-listed vehicle of Ministry of Posts and Telecommunications, plans to raise US$2 billion next month, making it the largest IPO in Hong Kong. Goldman Sachs and CICC condemned the leak as a 'blatant disregard of confidentiality and unauthorised release to the press of confidential information'. The sponsors and the exchange were investigating the leak to try to identify those responsible for releasing the information to the press. They could be excluded from the underwriting. A market observer said: 'It seems Goldman Sachs and CICC are under tremendous pressure from the exchange.'
