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Unicom debuts in China, sinks in HK
By Alex Frew McMillan
HONG KONG, China (CNN) -- Shares in China Unicom, the country's No. 2 cell-phone service, jumped as they went on sale for the first time in China. But the A-share initial public offering on the Shanghai Stock Exchange sent the company's Hong Kong-listed shares to a record low, and the gains in Shanghai were less than expected. China Unicom -- full name China United Telecommunications Corp. -- raised 11.5 billion yuan ($1.4 billion) in the sale, making it the second-largest IPO in the short history of China's stock markets. Unicom shares jumped 33 percent at the start, having debuted at 2.30 yuan. They closed at 2.87 yuan, for a rise of 24.8 percent. Some market watchers had expected gains of 50 percent or more in the erratic Shanghai market, which is still driven by retail investors looking for short-term plays. The company's Hong Kong shares hit a record low of HK$4.30 on Wednesday and closed down 1.1 percent at HK$4.40. Heavily oversubscribedThe two stocks -- which technically represent holdings in separate companies -- are expected to trade independent of each other in the long run. The company has also been dealt a knock by concerns about profitability per customer in China and the demand for Unicom's expensive new CDMA network. IPOs in China typically are substantially underpriced to attract interest and ensure big early moves. The offer was heavily oversubscribed with punters keen to lock in surefire gains. Institutional investors, who got 45 percent of the stock, are locked up from selling the stock for at least six months. China Unicom and No. 1 cell-phone operator China Mobile are both listed in Hong Kong. But Unicom is the first mobile-phone company to sell stock in China. A shares are off-limits to overseas investors. Though most large Chinese companies used to look exclusively overseas for capital, Unicom joins oil company Sinopec in looking to raise funds at home. Sinopec's 11.8 billion yuan ($1.43 billion) IPO last August is the largest stock debut in China. (Full story) The large amount of new stock depressed China's markets on Wednesday. Both the A share and B share indexes ended down in Shanghai, off 1.78 percent and 0.99 percent respectively.
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