China Mobile, biggest IPO in a decade, jumps 10 per cent on debut as investors shrug off valuation, blacklisting fears

China Mobile raised about US$8.8 billion from local investors in December, making it the world’s second biggest IPO in 2021
The A shares were priced about 52 per cent higher than its own shares listed in Hong Kong; the premium currently stands at 42.7 per cent

China economy

Cheryl Heng

Published: 9:57am, 5 Jan 2022

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China Mobile, kicking off the first stock listing in the mainland market, jumped as much as 10.4 per cent as investors shrugged off concerns about valuations to focus on its market-leading position as authorities seek to shore up the economy.

The stock opened at 63 yuan on its Shanghai debut on Wednesday and hit a high of 63.58 yuan, before closing at 57.88 yuan. It trades under the 600941 code.

The company raised 56 billion yuan (US$8.8 billion) by selling 972.6 million new shares, including an over-allotment, at 57.58 yuan apiece in late December, making it the world’s second-largest initial public offering (IPO) in 2021. It was also China’s biggest domestic IPO in a decade, according to Reuters.

The listing marks a year since several Chinese companies, including peer China Telecom, were forced out of the New York Stock Exchange under an executive order signed by former US president Donald Trump for their alleged ties to the Chinese military. The blacklisting has continued to mar US-China ties, including the most recent move against China’s AI champion, SenseTime Group.

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China Mobile set the IPO price at a 52 per cent premium over its own shares traded in Hong Kong last month. Those shares closed at HK$49.60 on Wednesday, or the equivalent of 40.55 yuan based on the current exchange rate.

The telco separately said on Tuesday that its stock buyback mandate of 10 per cent or up to 2.05 billion shares in Hong Kong could begin from February 7, a plan first approved by shareholders in March last year.

The premium involving dual-listed Chinese companies is a common trend, often attributed to supply shortage due to certain limitations on access to offshore markets. Their so-called A shares are 48 per cent more expensive than their version in Hong Kong on Wednesday, according to Bloomberg data, versus 39 per cent on average over the past 12 months.

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China Mobile added 10 million mobile customers to 956 million subscribers in the third quarter last year, according to its most recent report to shareholders. Earnings rose 6.9 per cent to 87.2 billion yuan in the nine months to September 30, from the same period a year ago.

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China’s economy likely gained sequential growth in the final quarter of 2021 as factory activity improved, according to economists at Standard Chartered. The Caixin China PMI Manufacturing index rose to 50.9 in December from 49.9 in November, the private survey showed on Tuesday.

The IPO has now completed the homecoming of sorts of the nation’s three dominant carriers. China Unicom has been listed since June 2000, while the largest fixed-line operator China Telecom completed its 54.2 billion yuan IPO in August.

While China Telecom rose on its debut, the stock has since slipped to 4.30 yuan, or 5.1 per cent below its IPO price of 4.53 yuan. The A shares traded at a 91.6 per cent premium to those listed in Hong Kong.