Shares rise 18pc after 20 minutes of trading on strong volume The trading debut by China Netcom Group Corp (Hong Kong) on the New York Stock Exchange yesterday exceeded market expectations, with the company's American depositary shares (ADS) opening at US$23.85 each and hitting US$25.80 after 20 minutes of trading - an 18 per cent gain on the initial public offering price - on a strong volume. One ADS is equivalent to 20 Hong Kong shares. At US$25.80 per share, Hong Kong shares might trade at $10.062 each, including fees. The fixed-line operator raised US$1.13 billion before the dual listing amid robust investor demand. That resulted in an automatic increase of the retail portion of the offering to 30 per cent of the total from 10 per cent, leaving some fund managers with fewer shares than they had hoped for and a potential appetite to buy more in the secondary market. 'If you compare China Telecom Corp and Netcom, on a valuation basis, Netcom is more attractive because of its higher yield. That's why it attracted so many institutional investors,' Guotai Junan Securities director Eric Lee said. Once the stock became available in the market, more fund managers might switch from China Telecom or simply add to their Netcom allocations outright, he said. Netcom's Hong Kong offer, jointly co-ordinated by China International Capital Corp, Citigroup Global Markets and Goldman Sachs, was priced at $8.40 per share, excluding brokerage, transaction and trading fees, which values its shares at 6.52 times this year's earnings. After tumbling 3.53 per cent yesterday, China Telecom closed at a price-earnings ratio of 8.79, leaving it looking pricier. Netcom has also promised to pay 35 to 40 per cent of its net profit as dividends over the next two years, after deducting revenues from connection fees. This translates into a dividend yield of between 3.9 per cent and 4.5 per cent, compared with the 2.4 per cent yield China Telecom's shareholders are expecting. In China Telecom's favour is the fact that the bulk of its subscribers are in southern China, which is the more affluent. Netcom has its core customer base in the north, but it is trying to expand into the south.