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Brokerage Guotai Junan Securities demonstrated the enduring appeal of IPO bets on the Chinese stock market, with its shares soaring by the 44 per cent within two hours of their debut on Friday as the benchmark indices tumbled.
The trading suspension came before the close of the morning session, with the shares closing at 28.38 yuan in Shanghai, or 43.98 per cent above their offer price of 19.71 yuan.
The company raised more than 30.1 billion yuan (HK$38.08 billion), making it the biggest initial public offering in mainland China in five years.
Ringo Choi, managing partner of accounting firm EY, said China’s securities regulator have encouraged companies to list their shares at “fair and reasonable” valuations, which helped fuel the first-day price spike.
“In order to complete their IPOs as soon as listing approval is granted, listing hopefuls elect to issue new shares at a lower price.”
The price-earning ratio for A-share listings averaged at 22 times in the first six months of this year, half the 2011 level of 48 times, according to EY.
In order to complete their IPOs as soon as listing approval is granted, listing hopefuls elect to issue new shares at a lower price
Ringo Choi,  EY
China’s listing market has been on fire this year, as companies seek to capitalise on robust investor demand. It is common for popular offerings to reach the daily trading cap on their debut.
Money raised in China’s IPO markets rose 316 per cent 147 billion yuan in the first six months of this year from a year earlier, as the Chinese securities regulator speeds up the approval process.
In contrast to Guotai Junan’s stellar debut in Shanghai, shares in Hong Kong-traded Guotai Junan International, the overseas arm of the parent company, plunged 5.6 per cent to HK$5.21 in morning trading.
The Shanghai Composite Index dropped 4.06 per cent to finish the morning session at 4,344 points. The decline followed Thursday’s fall of 3.46 per cent, amid a market correction over the past two weeks. The Shenzhen Composite Index was down 6.19 per cent to 2,548 points.
 
 
 


Shares in Guotai Junan Securities jump on debut as investors stick with IPO bets

Retail investors feel they are playing a safe hand in backing IPOs in the mainland Chinese stock markets. Photo: EPA

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