Guotai Junan’s 44% Surge in Trading Debut Prompts Brief Halt

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Guotai Junan Securities Co., China’s largest brokerage by revenue, surged 44 percent on its first day of trading in Shanghai after it completed the nation’s biggest domestic initial share sale since 2010.

The stock climbed by the exchange’s daily limit to 28.38 yuan as of 11:49 a.m. local time. The surge triggered a 30-minute suspension at the start of Friday’s trading. The Shanghai-based firm raised 30 billion yuan ($4.8 billion) after selling shares at 19.71 yuan apiece.

“The strong performance is a demonstration of investors’ confidence in Guotai Junan’s business and its future prospects,” said Chen Xingyu, a Shanghai-based analyst at Phillip Securities Research. “However, as the broader market is relatively weak at the moment, its share price will likely come under pressure. We might see a correction soon.”

The Shanghai Composite Index has fallen 14 percent from a more than seven-year high on June 12 amid concern its 152 percent rally in the previous year -- fueled by record levels of margin financing -- had driven valuations too high relative to earnings growth.

Guotai Junan had intended to use some of its IPO proceeds to finance its margin-trading business. Its sale brought the amount of stock sold by Chinese securities firms this year to a record $20 billion, data compiled by Bloomberg show. Almost all companies that went public in China this year surged by the 44 percent limit on their first day of trading, the data show.

Set up when two firms merged in 1999, Guotai Junan earned 13.5 billion yuan in revenue in 2014, ahead of brokerages including Citic Securities Co. and Shenwan Hongyuan Group Co., according to the Securities Association of China.

— With assistance by Aipeng Soo

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