China Telecom’s brutal post-IPO sell-off highlights valuation, trading risks in dual-listed stocks
- Stock tumbled again by the 10 per cent daily limit in Shanghai, though still valued at more than twice its shares in Hong Kong
- All eyes on the impending US$8.6 billion offering from China Mobile, whose shares are also traded in Hong Kong
Shares of the nation’s biggest fixed-line operator slumped by 10 per cent on Tuesday in Shanghai, a second day of maximum drop allowed, following its local debut on Friday. Only about 12 per cent of its free-float has changed hands this week, suggesting the selling pressure has not peaked.
The slump underscores the risk in holding dual-listed mainland stocks which trade at a huge premium to their securities offshore, especially in Hong Kong. The phenomenon is often attributed to local investors having an advantage of being closer to the companies at home, or a better understanding of their operations or financials.
There are 133 such mainland companies whose onshore securities fetch a premium over their equivalent equities listed in Hong Kong, according to data compiled by Shanghai DZH. That premium currently ranges from 30 to 49 per cent, and 39 per cent on average, according to data compiled by Hang Seng Indexes.
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Shares of China Telecom closed at 4.95 yuan in Shanghai on Tuesday while its Hong Kong-traded stock ended at HK$2.80 (2.33 yuan).
