What bubble? HK retail investors seek $50 bln in loans for Chinese online video IPO

Boc Hong Kong Holdings

28/01/2021 10:00

By Scott Murdoch
    HONG KONG, Jan 28 (Reuters) - 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  1024.HK , 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  HSBA.L  and Bank of China
Hong Kong  2388.HK  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.  urn:newsml:reuters.com:*:nL8N2K04B5
    "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)

 (Reporting by Scott Murdoch; Editing by Sumeet Chatterjee and
Ana Nicolaci da Costa)
 ((Scott.Murdoch@thomsonreuters.com;))