Retail loans for China’s Kuaishou HK IPO top $60 billion amid GameStop frenzy

HONG KONG, Jan 29 (Reuters) – China’s Kuaishou Technology has priced its Hong Kong IPO at the high end of the range to raise $5.4 billion, three sources said, as investors in retail swarmed the supply, depositing more than $60 billion in a bid to get a small slice of the stock.

The huge demand for the online video site from retail investors comes amid growing fears of an asset bubble, with amateur investors pushing up the price of assets ranging from cryptocurrencies to new stock market listings .

These concerns, triggered by a sharp rise in US video game retailer GameStop and a few other stocks, have led some brokerages around the world to raise margin requirements or stop offering leverage for buying. of titles.

In Hong Kong, however, scorching demand for Kuaishou shares from retail investors has driven margin funding requests to buy the company’s shares at more than HK$470 billion ($60.6 billion). ) only from major banks and brokers.

Small investors, who must deposit the funds in advance, were competing for only 2.5% of the capital raised, or $135 million in shares, but this had to be increased to 6% due to demand, according to a terms sheet for the agreement.

Margin lending, or the amount brokers can lend to individual investors to buy stocks, has been a big business in Hong Kong in recent years, with a large number of floating stocks attracting retail buyers.

Individual investors in Hong Kong, which has some of the highest retail tiers in the world, have been known to borrow heavily as bigger bids increase the chances of being awarded shares in an IPO.

Investors rely on a rise in the share price on the first day to pocket the gains after repaying the loan, but are at huge risk if a company’s shares crash early.

“There are the same risks here that we see globally with things like GameStop, people getting carried away and losing rationality,” GEO Securities managing director Francis Lun told Reuters.

“Banks are also fueling this frenzy. They put all their cash reserves into this IPO frenzy. There is no other area where they can generate HK$400 billion ($52 billion) in loans so quickly and they earn interest on it.

Kuaishou’s IPO was priced at HK$115 apiece, the high of its trading range, on Friday, the last day of the book’s build, two sources with direct knowledge of the matter said. 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, Hong Kong’s biggest 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 has offered HK$200 billion to investors, a spokeswoman said. Brokerage Bright Smart Securities had requests for HK$43.9 billion and Haitong International Securities HK$26.8 billion.

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 entire new economy equity sector may be the main incentive for Kuaishou’s strong demand.” ($1 = HK$7.7527) (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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