China’s Biggest IPO Since 2010 Rockets Higher

Today shares of China’s Guotai Junan Securities made their IPO debut on the Shanghai. The shares soared 44 percent as the company raised 30.1 billion yuan. This is China’s biggest IPO in five years.

This is the country’s third biggest brokerage and its opening price started at 28.38 yuan from its IPO price of 19.71 yuan.

We are seeing a herd mentality here. This explains the performance of the IPO. This is also quite typical of China’s financial markets. You have a new IPO and everyone wants a piece. The offer comes during a very volatile time for the mainland’s markets as the Shanghai Deposit lost three percent at the open and has already seen its biggest weekly loss since the start of the global financial crisis in 2009.

The broader declines are thanks to the stock markets seeing a drain in liquidity thanks to the multitude of new offerings on the table. There are a lot of offerings now coming on the markets. We could see some consolidation for a period of time. Looking at the Shanghai Composite, we have two key supports to watch. These are the technical levels at 4,400 and 4,250. If we lose these levels, then we can see more consolidation. The SSE is now trading around 4,403 at the time of this report.

China’s new offering market (IPO) has been hot this year and firms want to cash in on high investor demand. Chinese companies have already raised $39.4 billion in 2015. During the same period last year, IPOs in China saw $17.9 billion. This is more than double for an increase.

According to a report in Reuters, Guotai Junan Securities will use these funds to broaden the products the issue and will also expand their asset management business. They want to underwrite more securities among other initiatives.

State owned Guotai Junan Securities will trade on the Shanghai Composite, under the ticker 601211.SS.