HONG KONG: Hong Kong’s mom-and-pop investors have amassed over $50 billion in margin financing to buy shares in the initial public offering of China’s Kuaishou Technology, defying concerns about a pullback in global markets fuelled by a retail buying frenzy.
Online video site Kuaishou, which aims to raise up to $5.4 billion in the city’s largest float in more than a year, is set to price shares at the top of the $HK105-$HK115 marketing range on Friday, according to two sources with direct knowledge of the matter.
Demand for margin loans from HSBC and Bank of China Hong Kong to buy Kuaishou stock hit a first day record on Tuesday when the books opened for the retail portion of the deal, according to representatives for the two banks.
The financial hub’s two biggest banks have made available at least HK$350 billion ($45.14 billion) worth of margin financing as of Thursday with at least a further HK$50 billion ($6.5 billion) offered by Hong Kong’s army of small brokerages.
The scramble for financing by retail investors in Hong Kong for the initial public offering (IPO) comes even as surges in the share prices of some loss-making firms and frothy valuations have fanned concerns about asset bubbles.
A flood of money supply, ultra-low or zero interest rates and COVID-19 vaccine rollouts have sparked a ‘buy everything’ rally, helping world stocks add a whopping $33 trillion in value from their lows of last March.
“As the accumulated IPO loan applications for Kuaishou Technology have exceeded our original quota of HK$150 billion ($19.35 billion), HSBC is allocating extra funding for this IPO,” a spokeswoman for HSBC said.
Kuaishou is selling 9.1 million shares to retail investors in the IPO which represents 2.5% of the total deal. At the top of the price range, the retail portion is worth HK$1.04 billion ($134.14 million).
A Kuaishou spokesman said the company ‘welcomed all investors’ but declined to comment on specifics and the expected pricing of its IPO. The sources declined to be named as the information is not yet public.
Based on the demand for margin loans, Kuaishou’s retail portion is likely to be at least 385 times oversubscribed based on the number of shares being sold — in line with recent demand from mom-and-pop buyers for public offering of shares in Hong Kong.
With that demand under Hong Kong’s clawback rules, the amount of stock allocated to retail investors will increase from 2.5% to 6%, a term sheet for the deal showed.
The official numbers will be released before Kuaishou starts trading on the Hong Kong exchange on Feb. 5.
“This is definitely the hottest IPO this year despite the recent volatility of the stock market,” Dickie Wong, executive director of research at Kingston Securities told Reuters.
($1 = 7.7531 Hong Kong dollars)
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