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Market wobbles on trade, China to have its largest IPO in 5 years

CMC Markets

Being the last trading day of the month, investors continue to adopt a ‘wait and see’ approach amid uncertainties surrounding the US-China phase-one deal.

Despite of the lack of details, most market participants still expect some kind of resolution or progress to be reached by Christmas. In fact, the base line of recent low volatility is on the assumption that the next batch of tariffs will be deferred or roll back before the 15th December deadline.

US indices shrugged off initial shock from President Trump’s signing of the Hong Kong (HK) bill and closed broadly higher on Thursday. All sectors other than Industrials climbed, led by consumer discretionary (+0.83%), communications (+0.63%), information technology (+0.57%) and healthcare (+0.48%).

Technically, the S&P 500 carried on with its upward trajectory and attempt to challenge its next resistance level at 3,176 (127.2% Fibonacci Extension) level. Asian markets, however, are set to open mixed on Friday.

The Postal Savings Bank of China (PSBC) is preparing for its IPO in the Shanghai Stock Exchange and is expected to raise up to $32.7 billion yuan if a greenshoe option is fully exercised. The deal is going to be the largest IPO in mainland China in more than 4 years. PSBC is one of the six leading state-owned lenders in China and it is the largest network of branches in the country. It is currently listed in the Hong Kong Stock Exchange (HKEX) with code 1658 HK. It will mark the completion of all six state-owned banks to have their shares listed in both Shanghai (A) and HK (H).

This IPO has received overwhelming demand from investors, with a total of $1.3 trillion yuan subscription receiving bidding for $28.4 billion yuan of shares. The subscription amount is over 10 times bigger than the recent Alibaba IPO in HKEX. Huge demand for PSBC is likely to drain liquidity from the mainboard and thus exert pressure over the Shanghai Composite.

Hong Kong 50 - Cash

 


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