Latest news with #FastInterfaceforNewIssuance
Yahoo
22-03-2025
- Business
- Yahoo
Hong Kong's SFC orders brokers to end 'imprudent' margin financing to pre-empt IPO madness
Hong Kong's market watchdog has asked the city's stock brokerages to clean up their act in funding their clients in initial public offerings (IPOs), after a review discovered "imprudent and aggressive financing practices" that exposed both parties to financial risks or default. They would be required to collect an upfront subscription deposit of 10 per cent from clients who do not fully pre-fund their IPO orders, the Securities and Futures Commission (SFC) said in a circular on Thursday. The firms must also assess their financial capabilities and creditworthiness, as well as segregate those deposits to smoothen refunds for unsuccessful bids, it added. The decision followed a review of margin financing practices by some undisclosed brokerages, triggered by excessive oversubscription rates in stock offerings by companies including Mixue Group and Blok Group that could create an illusion of "hot" IPOs, officials said. Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team. Mixue's mascot Snow King strikes a gong during the company's listing ceremony on March 3. Photo: Reuter alt=Mixue's mascot Snow King strikes a gong during the company's listing ceremony on March 3. Photo: Reuter> Retail investors in Hong Kong borrowed more than HK$1.8 trillion (US$231.6 billion) from brokerages to bid for China's largest fresh-drinks chain Mixue, resulting in 5,258 times the number of shares on offer. They also took HK$474 billion in margin financing to bid for shares of toymaker Blok Group, or about 6,000 times the number of shares on offer. "Some of the imprudent and aggressive financing practices exposed themselves and their clients to undue financial risks, including the risk of default when the number of shares allotted to clients exceeds their financial capabilities," the SFC said. Other "deficiencies" included accepting clients' orders before ensuring they had sufficient resources to meet their obligations, it added. The caution reflects the unease among market regulators. The SFC issued a similar circular in November 2023, urging financial institutions to prudently manage their risks when providing IPO financing and subscription services following the introduction of the Fast Interface for New Issuance (FINI) platform. The platform allows brokers to prepay for only the maximum number of shares that can be allotted in a public offering, instead of locking in funds for the entire excess amount. Some brokers offered zero-interest margin financing loans to attract customers. In the Thursday circular, the SFC reminded its licensed corporations to take reasonable control measures to prevent a client from submitting multiple IPO orders and ensure the accuracy of client identification data. This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.
South China Morning Post
21-03-2025
- Business
- South China Morning Post
Hong Kong's SFC tells brokers to end ‘imprudent, aggressive' IPO financing practices
Hong Kong's market watchdog has asked the city's stock brokerages to clean up their act in funding their clients in initial public offerings (IPOs), after a review discovered 'imprudent and aggressive financing practices' that exposed both parties to financial risks or default. Advertisement They would be required to collect an upfront subscription deposit of 10 per cent from clients who do not fully pre-fund their IPO orders, the Securities and Futures Commission (SFC) said in a circular on Thursday. The firms must also assess their financial capabilities and creditworthiness, as well as segregate those deposits to smoothen refunds for unsuccessful bids, it added. The decision followed a review of margin financing practices by some undisclosed brokerages, triggered by excessive oversubscription rates in stock offerings by companies including Mixue Group and Blok Group that could create an illusion of 'hot' IPOs , officials said. Mixue's mascot Snow King strikes a gong during the company's listing ceremony on March 3. Photo: Reuter Retail investors in Hong Kong borrowed more than HK$1.8 trillion (US$231.6 billion) from brokerages to bid for China's largest fresh-drinks chain Mixue, resulting in 5,258 times the number of shares on offer. They also took HK$474 billion in margin financing to bid for shares of toymaker Blok Group, or about 6,000 times the number of shares on offer. 'Some of the imprudent and aggressive financing practices exposed themselves and their clients to undue financial risks, including the risk of default when the number of shares allotted to clients exceeds their financial capabilities,' the SFC said. Other 'deficiencies' included accepting clients' orders before ensuring they had sufficient resources to meet their obligations, it added. The caution reflects the unease among market regulators. The SFC issued a similar circular in November 2023, urging financial institutions to prudently manage their risks when providing IPO financing and subscription services following the introduction of the Fast Interface for New Issuance (FINI) platform. Advertisement The platform allows brokers to prepay for only the maximum number of shares that can be allotted in a public offering, instead of locking in funds for the entire excess amount. Some brokers offered zero-interest margin financing loans to attract customers.
Yahoo
15-02-2025
- Business
- Yahoo
Hong Kong's market watchdog reviews 8 brokerages amid IPO oversubscription frenzy
Hong Kong's market watchdog has launched a review of eight brokerages to examine their margin financing practices after witnessing heavy oversubscriptions for some initial public offerings (IPOs). The Securities and Futures Commission (SFC) was closely monitoring whether these brokerages were careful with their risk management of margin financing for new stocks, CEO Julia Leung Fung-yee said on Friday. Margin financing refers to loans that brokerages offer clients to buy stocks. "We will examine the securities firms' policies - whether they are sound, fully consider the customer's repayment ability and set appropriate loan limits to prevent overfinancing," she said. Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team. The SFC did not name the brokers that were being monitored. SFC CEO Julie Leung pictured in December 2022. She said individual investors should be careful in gauging demand for new shares from the oversubscription multiple alone. Photo: May Tse alt=SFC CEO Julie Leung pictured in December 2022. She said individual investors should be careful in gauging demand for new shares from the oversubscription multiple alone. Photo: May Tse> In November 2023, the SFC sent a circular to licensed companies saying they needed to prudently manage their risks when providing IPO subscription services and financing following changes introduced by the Fast Interface for New Issuance (FINI) platform. The FINI platform allows brokers to prepay for only the maximum number of shares that can be allotted in a public offering, instead of locking in funds for the entire excess amount. Some brokers offer zero-interest margin financing loans to attract customers. The SFC had urged companies to guard against any improper risk-taking activities, such as accepting large subscription orders without collecting sufficient subscription deposits from clients upfront or providing excessive IPO financing to clients. Leung's comments came after the watchdog observed that some IPOs were heavily oversubscribed because of easy margin financing terms offered by brokers since the launch of FINI. She reminded individual investors to be careful about gauging demand for new shares from the oversubscription multiple. The performance of some "hot" IPOs on the stock market was not as good as expected, she added. "The [FINI] mechanism allows brokerage firms to lend large amounts because there is a cap on funds they need to pay [as] real funding costs are not reflected," said Dickie Wong, executive director of research at Kingston Securities. The worry was this would distort the perception of the IPO and mislead the public into believing that the new shares would perform well on their debut, causing stock prices to fluctuate further, he added. Last month, Chinese toymaker Bloks Group attracted huge demand from retail investors for its HK$1.6 billion (US$206 million) IPO. Retail investors submitted orders for 6,000 times the shares allocated, making it the second-hottest IPO in the city after publisher Most Kwai Chung attracted 6,289 times of subscription for its IPO in 2018. Retail investors borrowed nearly HK$474 billion through brokerages to bid for Bloks' IPO, according to a Bloomberg report, which cited TradeGo data. Shares of Bloks rose nearly 45 per cent from its IPO price. Other highly subscribed recent IPOs include Hong Kong actor Roger Kwok's Herbs Generation Group, which listed in December, and Chinese lighting devices supplier APT Electronics' offering in November. Herbs Generation's shares dropped nearly 47 per cent after the IPO's retail tranche was oversubscribed 6,083 times. APT's shares rose nearly 21 per cent from the IPO price. Katerine Kou, chairwoman of the Hong Kong Securities Association, welcomed the SFC's move. "We all hope for clearer guidelines on the margin-financing policies," she said. "The thematic review should hopefully benefit the market as a whole." This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved. Sign in to access your portfolio
South China Morning Post
14-02-2025
- Business
- South China Morning Post
Hong Kong's market watchdog reviews 8 brokerages amid IPO frenzy
Hong Kong's market watchdog has launched a review of eight brokerages to examine their margin financing practices after witnessing heavy oversubscriptions for some initial public offerings (IPOs). The Securities and Futures Commission (SFC) was closely monitoring whether these brokerages were careful with their risk management of margin financing for new stocks, CEO Julia Leung Fung-yee said on Friday. Margin financing refers to loans that brokerages offer clients to buy stocks. 'We will examine the securities firms' policies – whether they are sound, fully consider the customer's repayment ability and set appropriate loan limits to prevent overfinancing,' she said. The SFC did not name the brokers that were being monitored. SFC CEO Julie Leung pictured in December 2022. She said individual investors should be careful in gauging demand for new shares from the oversubscription multiple alone. Photo: May Tse In November 2023, the SFC sent a circular to licensed companies saying they needed to prudently manage their risks when providing IPO subscription services and financing following changes introduced by the Fast Interface for New Issuance (FINI) platform. The FINI platform allows brokers to prepay for only the maximum number of shares that can be allotted in a public offering, instead of locking in funds for the entire excess amount. Some brokers offer zero-interest margin financing loans to attract customers.
