Leading global investment bank UBS AG has refuted the allegation by a mainland newspaper that it had unduly profited from its role as a sponsor of PetroChina's 66.8 billion yuan A-share IPO in November.

 

The 21st Century Business Herald carried a story earlier this week alleging that UBS' trading of PetroChina's H shares on the Hong Kong stock exchange had contributed to the slide in the mainland company's A shares since their debut on the Shanghai Stock Exchange on November 5.

 

The story, citing an unnamed official from the issuance examination committee of the China Securities Regulatory Commission (CSRC), said both the issuer and the underwriter of the PetroChina stock should take responsibility for not being able to stabilize the share's trading price.

 

It said as many as 10 companies controlled by UBS AG had participated in jointly trading and manipulating PetroChina's H shares before the oil company issued its A-share prospectus.

 

Some other mainland publications have since printed similar versions of the story.

 

The price of PetroChina's A share has dropped an aggregate 28.5 percent to 31.39 yuan apiece from 43.96 yuan despite occasional rebounds. The benchmark Shanghai Composite Index has dropped a total of 5.7 percent, or 325.5 points, in the same period.

 

Though neither the CSRC nor the Shanghai Stock Exchange commented on it, the report has become a hot topic in the market.

 

Regulators and stock analysts have noted the anomalous dual listing arrangement, resulting in wide price gaps between H and A shares of mainland enterprises. The case of PetroChina is of particular significance because of the sheer size of the company. As a constituent stock in the benchmark index, PetroChina's share price movements have a dominant influence on market sentiment.

 

The index yesterday rose 75.54 points, or 1.44 percent, to the one-month high of 5308.89, with 588 of 873 stocks ending higher than the previous day. Total turnover increased 19.7 percent from the previous trading day to 149 billion yuan.

 

PetroChina A shares dropped slightly to 31.39 yuan apiece while its H shares shed 0.7 percent to HK$14.04.

 

Telecommunication shares were the major contributor to yesterday's rally. The recovery of financial and property shares also helped push up the benchmark index.

 

(China Daily December 28, 2007)