China Telecom jumps on bank coverage
By Alex Frew McMillan
HONG KONG, China (CNN) -- Stock in China Telecom Corp. shot up on Wednesday as investment banks began covering the company with generally positive ratings.
The shares jumped 4.26 percent to close at HK$1.47 -- the same price that they debuted at when the fixed-line giant went public in November. (Full story)
China Telecom had a troubled start to life as a public company, delaying its stock sale and then being forced to slash its size by 55 percent before it got it off the ground. (Full story)
On Wednesday, its three underwriters all began issuing research reports on the company. Merrill Lynch started coverage with a "neutral" rating, Morgan Stanley rated it "overweight" and China International Capital Corp. called it a "buy."
Bullish investment call
Goldman Sachs, which was not a lead underwriter, put it on its investment list of current investment buys, stripping China Mobile out of its model telecom portfolio to make room for it.
The bank set a 12-month price target of HK$1.75, a 19 percent leap from Telecom's current level and a more optimistic call than any of the other three banks.
The investment bank noted that the telecom industry has high barriers to entry, which cuts back on competition and means its sales and profit margins are more stable.
The decision to promote China Telecom and downgrade China Mobile, the second-largest listing in Hong Kong, "reflects our negative view on the Chinese wireless space and our preference for a defensive position in China Telecom," the bank said in a report.
