China Telecom cleared for $8.4bn Shanghai share sale

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China Telecom Corp Ltd updates

China Telecom, one of China’s state-run telecoms groups, has been cleared to raise $8.4bn in Shanghai after being forced off the New York Stock Exchange, in what would be the country’s biggest listing in a decade.

The company was booted from the New York Stock Exchange along with state-run peers China Mobile and China Unicom in January to comply with an executive order signed by Donald Trump that prohibited Americans from investing in businesses with alleged ties to China’s military.

China Telecom, which is also listed in Hong Kong, received approval on Thursday from the China Securities Regulatory Commission to sell up to 12.1bn shares. It plans to raise Rmb54.4bn ($8.4bn) on the main board of the Shanghai Stock Exchange.

The decision was the latest sign of Beijing’s efforts to minimise the fallout of any financial decoupling of the world’s two largest economies.

China has clamped down on companies seeking US IPOs, most recently targeting Didi, the dominant domestic ride-hailing app, just days after it went public in New York last month. Beijing has also proposed rules that would force technology companies to seek regulatory approval before listing overseas.

US regulators have also threatened to de-list Chinese companies if they do not comply with American auditing standards. About 250 Chinese companies trade shares more than $2tn on US equity markets.

“It’s increasingly likely that more delistings are going to happen,” said Thomas Gatley, an analyst at Gavekal Dragonomics. He said those companies would “inevitably” look to stock markets in mainland China or Hong Kong.

Chinese companies barred from US markets were likely to raise capital in Shanghai or Shenzhen, analysts said, while those under pressure from Beijing would shift to Hong Kong for IPOs or back-up listings.

The approval for the China Telecom share sale also underscored Beijing’s determination to use its capital markets to offset any damage wrought by US regulators, according to analysts and lawyers.

Political interference in markets by both Washington and Beijing was “quickening the pace” for domestic listings by Chinese companies outside the US, according to a senior lawyer at an American firm in Hong Kong.

Andrew Sheng, former chair of Hong Kong’s financial regulator, said: “American politicians are showing they do not welcome foreign listings if they are seen as rivals. This is good for all non-American markets, so decoupling may end up with America alone.”

Sheng also cited the improving attractiveness to Chinese tech companies of domestic markets, thanks to an increasingly sophisticated group of investors and deep pools of savings. “The potential for Chinese companies to tap domestic capital is huge,” he said.

China Telecom was one of the first state-owned Chinese companies to list in the US when it launched an initial public offering in 2002. Its planned Shanghai listing would be the biggest for mainland markets since Agricultural Bank of China raised more than $10bn in Shanghai as part of a dual listing that also tapped Hong Kong for $12bn in 2010, according to Dealogic data.

But Gatley warned that China’s capacity to absorb a flood of big listings by returnees was limited, adding that regulators could be forced to slow the pace of onshore IPOs as Beijing prioritised urgent re-listings from the US.

China Telecom’s Hong Kong-listed shares were down 3.1 per cent on Friday.

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