SFC reportedly considers 10pc deposit for IPO subscribers

Hong Kong’s securities watchdog is reportedly considering reviving the practice of charging initial public offering subscribers with a 10 percent deposit, after some brokerages’ offers of up to 200 times of margin financing sparked concerns, according to reports.

The revival, along with other proposals, is under the market consultation made by the Securities and Futures Commission, Ming Pao reported.

The resumption indicates that the maximum percentage of financing for a subscription of IPO shares will not exceed 90 percent, reports indicated.

In addition, if a client provides shares as collateral, the deposit could be reduced accordingly, reports said. 

A spokesman for the SFC responded that it would not comment on market rumors, but it had completed a thematic review of eight brokerage firms to assess compliance with the prudential risk management standards set out in the commission's November 2023 FINI launch circular. 

The SFC added that the results of the review and further supervisory guidance would be announced to the industry shortly.

The Hong Kong Exchanges and Clearing (0388) launched a digital IPO subscription platform, FINI, at the end of 2023, which allows investors to make a paper subscription without paying certain deposits.

The new mechanism is regarded as one of the reasons for the subscription frenzy of recent IPOs. 

Amid an improved market sentiment, some local brokerages also raced to offer margin financing leverages of 100 to 200 times.

Mixue (2097) was eventually oversubscribed by more than 5,258 times, while Bloks (0325) received cheques of nearly 6,000 times on the shares it planned to offer. Herbs Generation Group (2593) booked an oversubscription of more than 6,082 times. Among them, Mixue, a Chinese fruit tea chain, froze more than HK$1.81 trillion of applicants' funds -- a record high in the Hong Kong market.

STAFF REPORTER