The Example of China Telecom

I can still recall the frenzy around the listing of China Telecom in 1997, in the midst of the Asian financial crisis.

The New York Times expressed the spirit of the time when it stated: “For investors still willing to try the bumpy ride in Asia, it’s hard to think of a sexier pair of words than ‘China Telecom.’” (China Telecom was broken up in 1999, and reborn as China Mobile.)

Broker analysts had dubbed the company the hottest “red-chip” initial public offering to come down the pike since the handover, when Hong Kong was returned to China. (“Red chips” are mainland Chinese companies listed on the Hong Kong Exchange).

Even as Hong Kong’s financial secretary was publicly insisting that there was “no political or economic need for us to disband the Hong Kong Dollar peg,” one of the most renowned Hong Kong stock analysts was blandly assuring us that buying China Telecom was a “no-brainer”—and guaranteed to make money for those who purchased the stock.