China Mobile is reviving efforts to seek a listing in Shanghai after years of unsuccessful attempts, analysts and bankers said, sending the index heavyweight up as much as 4.3 percent intraday Friday.
The parent company of China Mobile is expected to float about 5 percent of its existing shares in Shanghai to raise roughly 90 billion yuan ($13.18 billion), based on the current price of its Hong Kong-listed shares, analysts said.
The valuation of the stock is pretty rich now with a price-to-earnings ratio of 13 times, which is in line with its international peers. said Tiffany Feng, a Guotai Junan Securities analyst in Hong Kong.
Feng added that China Mobile, the world's largest mobile operator by subscribers, needed more capital to support its 3G network expansion to compete with rival China Unicom (0762.HK).
A China Mobile spokeswoman confirmed that the company was pursuing a Shanghai listing, but said when to list would be determined by regulatory approval. She declined to comment further.
China Mobile first began to seek listing in Shanghai in the early 2000s but has so far made little progress, mainly because of a lack of Beijing's policy support.
This time, China Mobile has at least already received a welcome from the local government of Shanghai, which has the country's biggest stock exchange.
Shares of China Mobile extended gains in heavy trading in Hong Kong on Friday after Shanghai Vice-Mayor Tu Guangshao expressed support for the launch of a so-called International Board next year at the Shanghai Stock Exchange, according to an interview published by the official Shanghai Daily.
The trading volume of China Mobile shares was around triple the daily average and accounted for nearly 10 percent of the market's total turnover on Friday.
Major companies like China Mobile and HSBC Holdings Plc are expected to list on the planned International Board although the details remain unclear, said bankers familiar with the situation.
But any near-term listing plan for China Mobile seemed unlikely due to the long and complicated approval processes in Beijing and uncertainties in market recovery, they said.
Some bankers said China Mobile could list in Shanghai in the middle of 2010, although the timeframe could be delayed if market recovery stalled. The Shanghai benchmark index .SSEC has gained over 80 percent this year.
RETURN TO THE MAINLAND
Shares of China Mobile, whose market value is around $230 billion, rose 1.66 percent to HK$88.55 ($11.43) by Friday's close after climbing 4.3 percent to a near 12-month high intraday.
On Thursday, shares of China Mobile advanced 7.5 percent amid market talk that the company had appointed an underwriter to work on its listing plan.
The market consensus is China Mobile has a chance to be listed in Shanghai, but that will have to wait unitl the middle of next year, said Jim Tang, a telecoms analyst with Shenyin Wanguo, who suggested that investors take profit on its shares.
China Mobile is among more than a dozen major red-chip companies that are keen to return to the mainland market for listing. Red chips are Chinese companies listed in Hong Kong.
In 2006, Beijing started to draft rules allow red-chips to issue China Depositary Receipts (CDRs), an instrument that would allow such companies to float shares in Shanghai, but progress stalled in 2008 as the Shanghai stock market became the world's worst major performer amid the global financial crisis.
China Mobile and Hong Kong's fifth-largest lender, Bank of East Asia, have been named by state media for years as the potential candidates to launch CDRs.
Beijing's influential Caijing magazine reported that China Mobileb had hired China International Capital Corp (CICC), an investment banking joint venture one-third owned by Morgan Stanley, to underwrite its Shanghai listing.
But investment bankers said there had not yet been an official appointment of underwriters by China Mobile. They noted that it would not be a surprise for CICC to win the mandate as CICC had been working on proposals to help China Mobile list on the mainland market for at least three years.
CICC helped China Mobile list in Hong Kong in 1997.
($1=6.831 Yuan; $1=7.750 Hong Kong Dollar)
(Additional reporting by Parvathy Ullatil and Alison Leung in Hong Kong and Michael Wei in Beijing; Editing by Chris Lewis)