Shares in Hongkong Telecom finished higher yesterday on speculation that key shareholder China Telecom could be considering offloading its 13 per cent stake through the issue of exchangeable bonds. Hongkong Telecom edged up 0.69 per cent to $14.55, 4.12 per cent up on a fortnight ago. Brokers said China Telecom could choose to issue the bonds as a means to generate much-needed cash while maintaining short-term control of the shares. A Hongkong Telecom spokesman said he did not comment on market rumours. 'It would be a matter for the shareholders of China Telecom,' he said. Analysts said the prospect of an issue of bonds made sense as an exchangeable bond was a politically acceptable way for Beijing to sell down its stake. Exchangeable bonds would mean the company's Hongkong Telecom stake was making a substantial contribution to earnings, which it was not doing at present. Counting against the speculation was that China Telecom increased its stake in the Hong Kong telecommunications giant in February from 12.5 per cent and previous statements from the company that it wanted to enlarge its stake. One analyst said: 'There is no specific reason why China Telecom would want to increase its stake in Hongkong Telecom but there are good reasons why it would want to decrease its stake.' He said future investments would probably favour infrastructure projects. 'The days of investment purely for face and to exert political influence are well and truly over,' he said. China Telecom is the parent of locally listed China Telecom (Hong Kong). Brokers said the buying that supported Hongkong Telecom's gains against the backdrop of the broader market's falls was coming out of the United States.