China Mobile falls below HK$100 after UBS downgrades forecasts

Shares of China Mobile yesterday sank below HK$100 for the first time since August last year after UBS cut its earnings forecasts and price target for the stock, saying a slowing mainland economy could erode profits of telephone operators.

The stock dropped 1.1 per cent or HK$1.10 to HK$99 despite opening higher at HK$100.80 and ending the morning session at HK$101.70. The last time the stock closed below HK$100 was on August 29 last year, when it fell to HK$99.25.

Investors have been increasingly uneasy about China Mobile's profitability, as the mainland's slowing economic growth was expected to hurt the telecommunications industry. On August 27, China Mobile is due to release its first-half earnings which analysts expect to have grown between 30 and 36 per cent.

UBS cut its earnings per share estimate 3 per cent to 5.93 yuan for this year, 4 per cent for next year and 2 per cent for 2010. It also cut its price target for China Mobile 22 per cent to HK$138 from the HK$178 it set in October last year. The bank maintained its buy rating on the mobile operator.

'We factor in slower revenue growth for all three Chinese [telephone companies] to reflect a slowing economy,' UBS analyst Jinjin Wang wrote in a research note, adding that the sector's revenue growth fell to 7.7 per cent in the second quarter from 10.8 per cent in the first.

UBS also lowered its price targets for China Telecom Corp, China Unicom and China Netcom Group Corp as well as earnings forecasts for China Telecom and Unicom.