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ZTE Corporation, the second largest telecoms equipment provider in China, made a strong debut in Hong Kong yesterday, showing a positive signal for big future debutants.
The first A-share company being traded in Hong Kong saw its shares jump 11 percent from its offering price and closed at HK$24.4 in its debut yesterday, with an intra-day highest price of HK$25 per share. A total of 86.7 million shares involving a turnover of approximately HK$2.1 billion were traded yesterday.
The rise in its H-shares bucked a dip in the blue-chip Hang Seng Index which ended down 13.5 points, or 0.1 percent lower at 14,008 points.
ZTE also outperformed three much smaller debutants China Wireless Technologies, Texhong Textile, and Jinheng Automotive Safety Technology, indicating investors are still choosy about initial public offerings (IPOs).
Considering that a large chunk of capital has been locked up for big upcoming IPOs, ZTE's performance was cheering, said Herbert Lau, director of research at Celestial Asia Securities.
Many investors have their money tied up with IPO applications in Air China, the country's largest carrier and Link REIT, Hong Kong's first real estate investment trust. The IPOs, which will make their debut next week, are worth more than US$4 billion. They have locked up over US$22 billion in retail investor funds.
ZTE Chairman Hou Weigui said he was satisfied with the share performance and confident in the company's future development. "As the first A-share company issuing H shares in Hong Kong, the performance of our share price demonstrated investors confidence in our company," he said.
ZTE said it hoped overseas sales would triple to 40 percent of its total sales by 2006, with focus on emerging markets.
Gartner, a leading international IT research company, said on Tuesday it forecast more than half of ZTE's revenue would come from overseas markets by 2006.
Responding to recent corporate scandals involving Hong Kong-listed mainland companies, Hou said they did not have any negative impact during the company's international roadshow for its IPO, and stressed ZTE's financial disclosure was transparent.
Shenzhen-based ZTE, which drew investor interest of 250 times the retail portion on offer, has locked up HK$77.6 billion in funds.
As a result, 50 percent of the offering, instead of the initially earmarked 10 percent of the offering, went to retail investors.
The company, which priced its offering at the top end of an indicated range, sold 141 million H-shares and raised US$398 million during its listing in Hong Kong. The company plans to use about 60 percent of the net proceeds to expand its overseas business and the remaining to enhance its research and development capacity.
ZTE's offering price of HK$22 represents about 15.4 times its 2005 earnings. That translates into a 15.7 percent discount to its Shenzhen-listed A shares, which traded at 27.7 yuan. Shares of Hong Kong-listed mainland companies, or H-shares, trade at an average of 43 percent discount to A-shares.
Lisa Li, an analyst with China Capital International Corp, wrote in a recent report that H-shares in ZTE are expected to trade in a range of HK$23.7 to HK$27.8.
(China Daily December 10, 2004)
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