Telecom Stocks, Hang Seng Fall

123jump.com Staff
03 Jun, 2008
New York City

Chinese telecom stocks fall after a three-way deal among China Netcom, China Unicom and China Telecom for $56 billion. Yuan gains to a record high. In Hong Kong trading Hang Seng Index declined 1.83% or 455.60 at 24,375.76, and the China Enterprises Index of Hong Kong-listed mainland companies, or H shares, dropped 2.88% or 404.39 at 13,621.98. In Shanghai trading CSI 300 Index shed 0.32% or 11.72 to 3,614.11.

[R]6:00AM New York, 6:00PM Hong Kong – Chinese telecom stocks fall after a three-way deal among China Netcom, China Unicom and China Telecom for $56 billion. Yuan gains to a record high.[/R]

Market sentiment

In Hong Kong trading Hang Seng Index declined 1.83% or 455.60 at 24,375.76, and the China Enterprises Index of Hong Kong-listed mainland companies, or H shares, dropped 2.88% or 404.39 at 13,621.98. In Shanghai trading CSI 300 Index shed 0.32% or 11.72 to 3,614.11.

Daily turnover on main-board was HK$83.86 compared with HK$74.3 billion yesterday.

China Unicom and China Netcom to merge

China Unicom and China Netcom announced yesterday that each share of Netcom will be exchanged for 1.508 Unicom shares in a proposed merger based on the price of China Netcom shares on the Hong Kong mainboard on May 23, with a 3% premium.

Chairman and chief executive officer of China Unicom Chang Xiaobing added that subject to the approval by shareholders each American depository share of China Netcom will be exchanged for 3.016 American depository shares of the new China Unicom.

Chang explained that presently the merger is between the Hong Kong listed entities China Unicom Limited and China Netcom Group Corporation, and does not involve holding companies.

The combined company will have a capital of 23.76 billion shares valued at Rmb 439.17 billion, providing integrated services such as mobile and fixed-line telecommunications, broadband, data and value-added services.

According to chairman and chief executive officer of China Netcom Zuo Xunsheng, after the merger the company will cease to operate as a listed firm.

Separately, China Telecom announced that it has reached an agreement to buy the CDMA technology based wireless services of China Unicom in cash. China Unicom will sell its wireless services for Rmb 43.8 billion and its parent China Unicom Group will sell its CDMA network for Rmb 66.2 billion to China Telecommunications Corporation, the parent firm of China Telecom.


Yuan rise to a fresh high

The China Foreign Exchange Trading System reported today that the yuan rose to Rmb 6.9295 yuan to one dollar, a rise of 77 basis points from yesterday. The currency has gained 5% since the beginning of the year.

The yuan has advanced 227 basis points against the euro, 939 basis points against the British pound, and 88 basis points against the Hong Kong dollar, but declined 538 basis points against the Japanese yen.

Gainers & Losers

Hong Kong stocks fell on a sell-off particularly of telecommunications stocks as investors took profits after the release of a three-way deal among Chinese telecom companies.

China Unicom plunged 14.1%, China Netcom fell 12.8% and China Telecom shed 12.7%. China Mobile also fell 2.2%.

Similarly, telecommunication gear makers also dropped. ZTE Corp fell 6.9%, China Communications Services declined 6.7% and Comba plunged 7.9%.

HSBC Holdings declined 0.8% after credit rating agency said it has downgraded its rating on three brokerage firms, Lehman Brothers, Morgan Stanley and Merrill Lynch.

New listing Xtep International fell 6.2% at HK$3.80.