The 20-times leverage matches the highest ratio ever offered by brokerages including Bright Smart Securities & Commodities Group and UP Fintech Holding Ltd., a reflection of fierce competition for finance and trading fees on what could be the biggest IPO in history.
“Pretty much every broker and bank is trying to find margin financing for its clients so they can try to win allotment for shares,” said Nick Xiao, chief executive officer of Hywin International, a financial services firm in Hong Kong. “Ant is the deal of the decade.” Hong Kong has more than 700 brokerages, though just 14 generate more than half the city’s daily stockFor investors, the loans increase the odds of winning an IPO allocation and amplify gains when a stock rises after listing. But they can also lead to big losses when deals flop: For someone using 20 times leverage, a stock would only need to decline 5% to wipe out their entire investment.
Hongkongers typically only turn to independent brokers like Bright Smart for margin loans when they’re especially bullish on an IPO, because the firms often charge higher interest rates than commercial banks or their brokerage arms. IPOs by NetEase Inc. and JD.com Inc in the city earlier this year also saw similar lending offers.
Futu Holdings Ltd., an online broker backed by Tencent Holdings Ltd., is set to provide HK$30 billion for Ant margin loans, the firm’s biggest ever provision. Bright Smart is preparing as much as HK$50 billion.