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China Telecom Corp surges 34% on its first IPO day

China Telecom Corp soared 34% on its Shanghai debut on Friday, defying a pessimistic market after raising $7.3 billion in the year’s largest public offering.

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Shares of the Chinese telecom behemoth, which is on the US government’s blacklist owing to alleged ties to the Chinese military, started 5.7 percent higher and climbed as far as the bourse’s 44 percent new share limit before giving up part of their gains. The shares finished the day at 6.11 yuan, up from an offer price of 4.53 yuan, in a notable rise in a poor market that saw China’s blue-chip index drop almost 2%.

“When money is hard to get by elsewhere, speculators flock to newly-listed China Telecom,” said Li Runze, an analyst at Soochow Securities.

China Telecom’s Hong Kong-listed shares (0728.HK) fell about 5% on Friday, trading at half the price of their Shanghai equivalents, indicating that the rise was not based on fundamentals, he noted.

China Telecom’s Shanghai share price would certainly benefit in the near term from the so-called “green shoe” over-allotment mechanism, as well as its state shareholders, according to Liam Zhou, founder of Shanghai-based hedge fund Minority Asset Management (MAM).

According to Refinitiv statistics, the sale is the largest A-share IPO since PetroChina Co Ltd’s (601857.SS) $8.9 billion Shanghai IPO in 2007.

China Telecom, which was delisted from the New York Stock Exchange in May, raised 47.1 billion yuan ($7.3 billion) in Shanghai to expand its domestic funding options. China Telecom, the country’s largest fixed-line telecommunications provider, attracted a number of significant investors in its Shanghai offering, including Huawei, DBAPPSecurity Co (688023.SS), and Bilibili Inc.

In the wake of Sino-US tensions, a rising number of U.S.-listed Chinese businesses are selling shares publicly in Hong Kong or mainland China. China Mobile, a state-owned competitor, has also sought to list in Shanghai, and a subsidiary of China United Network Communications Group (China Unicom) was listed in 2002.

China Telecom made its public debut just days after reporting a 27.2 percent increase in first-half earnings. Within three years of its Shanghai IPO, it also vowed to increase the cash dividend ratio to 70% or higher.

Blacklisted under Trump administration

After the three companies were banned by the former Trump administration in November last year, the New York Stock Exchange delisted China Telecom, China Mobile Ltd (0941.HK), and China Unicom Holdings.

The three companies were among a list of 31 that the US government had barred investing in because it said they were owned or controlled by China’s military.

China’s securities authorities authorized China Mobile’s proposal for a domestic listing earlier this week, with a goal of raising 56 billion yuan. In Shanghai in 2002, China United Network Communications Ltd (600050.SS), a subsidiary of China United Network Communications Group, became public.

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