Band Scott Murdoch
HONG KONG, January 29 (Reuters) – Chinese technology Kuaishou 1024.HK valued its Hong Kong IPO at the top of the range to raise $ 5.4 billion, three sources said, as retail investors flooded the offer, depositing more than $ 60 billion in a bid to secure a small portion of the action.
Huge demand for the online video site from retail investors comes amid growing fears of an asset bubble as amateur investors jack up the price of assets ranging from cryptocurrencies to new stock quotes .
These concerns, triggered by a sharp increase in US video game retailer GameStop GME.N and a few other stocks, have led some brokerage firms around the world to increase margin requirements or stop offering leverage for the purchase of securities.
In Hong Kong, however, searing demand for Kuaishou shares from retail investors has prompted margin funding requests to buy the company’s shares beyond HK $ 470 billion (HK $ 60.6 billion). dollars) only at major banks and brokers.
Small investors, who must deposit funds up front, were competing for just 2.5% of the capital raising, or $ 135 million in shares, but this is expected to be increased to 6% due to the request, according to a condition sheet for the agreement.
Margin loans, or the amount brokers can lend to individual investors to buy stocks, has been big business in Hong Kong in recent years with large amounts of equity attracting retail buyers.
Individual investors in Hong Kong, which has one of the highest levels of retailing in the world, are notorious for borrowing heavily, as larger bids increase the chances of being awarded shares on an IPO. stock Exchange.
Investors rely on a rise in the stock price on day one to pocket gains after paying off the loan, but face enormous risk if a company’s shares empty in their early stages.
“There are the same risks here that we see in the world with things like GameStop, people get carried away and lose their rationality,” Francis Lun, managing director of GEO Securities, told Reuters.
“The banks are also fueling this frenzy. They are putting all their cash reserves into this IPO frenzy. There is no other area where they can generate loans worth HK $ 400 billion. ($ 52 billion) that quickly and they earn interest on it. “
Kuaishou’s IPO was priced at HK $ 115 apiece, the top of its marketing lineup on Friday, the last day of the book’s construction, said two sources with direct knowledge of the matter. They declined to be named because the information had not yet been made public.
The company did not respond to a request for comment.
HSBC HSBA.L, Hong Kong’s largest bank, increased its margin funding quota for the deal from HK $ 150 billion to HK $ 200 billion after strong demand, a spokeswoman said.
Bank of China Hong Kong 2388.HK offered HK $ 200 billion to investors, a spokeswoman said. Bright Smart Securities Brokerage 1428.HK had claims for HK $ 43.9 billion and Haitong International Securities 0665.HK 26.8 billion Hong Kong dollars.
Everbright Sun Hung Kai securities strategist Kenny Ng said the growing popularity of digital businesses during the COVID-19 pandemic has fueled demand from retail investors.
“The performance of the whole new economy equity sector may be the main incentive for strong demand in Kuaishou.”
($ 1 = 7.7527 Hong Kong dollars)
(Reporting by Scott Murdoch in Hong Kong; additional reporting by Kane Wu and Julie Zhu; Editing by Sumeet Chatterjee and Richard Pullin)
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