HK securities brokers ready billions for Ant Group stock puntBusiness | 23 Oct 2020 2:30 pm
Securities brokers in Hong Kong are readying billions of margin-lending dollars to tap an expected surge in retail demand for Ant Group's likely US$35 billion dual-listing in Hong Kong and Shanghai in the next few weeks, industry officials said.
Margin lending, or the amount brokers can lend to individual investors to purchase shares, has been a big business in Hong Kong in recent years with a large number of equity floats luring retail buyers.
Hong Kong had 851,157 margin lending accounts with total loan volume of HK$161.8 billion (US$21 billion) in the first half, according to the city's Securities and Futures Commission (SFC), up sharply from 601,842 at the same time last year.
Bright Smart Securities, one of the city's largest brokerages, said it would lend up to HK$50 billion – one of the firm's largest offerings – for the Ant IPO despite looming markets uncertainty due to the approaching U.S. election.
"We will make sure our interest rate will be the lowest among our peers," chief executive Edward Hui told Reuters, adding retail investors would only have to put up 5 percent as a deposit to take on a margin loan to buy Ant shares.
Another Hong Kong brokerage UOB Kay Hian has earmarked HK$20 billion for Ant IPO margin financing, a spokeswoman said.
The lending could be for 6-7 days and is lucrative for the brokerages as they earn commission on executing trades as well as interest income from margin financing.
"We see in Hong Kong that retail investors are always keen to buy into IPOs, it's almost a form of gambling and there is a strong trend for them to only hold on to them for a day or two," the Hong Kong Institute of Investors' chairman Ricky Tam said.
Retail brokers said the margin interest rates would be set closer to the IPO's launch date. The strong demand could raise the short-term Hong Kong Interbank Offered Rate (HIBOR).
The two-week Hong Kong Interbank Offered Rate climbed for a fourth straight session on Thursday to its highest in more than seven weeks.