HK investors queue to buy on margin
For the thousands of Hong Kong residents who queued for hours to register for new shares in a small Chinese carmaker and the millions set to apply for the listing of China's largest life assurer, Christmas has come early.
Lured by the prospect of a large profit on the first day of trading, the territory's retail investors have rushed to buy into initial public offerings, prompting fears of a new speculative bubble.
Demand for shares in Great Wall Auto, the small car group, exceeded supply by more than 680 times, a level not seen since the dot.com mania of the late 1990s. And China Life has printed 2.2m application forms - one for every three Hong Kong residents - in expectation of huge retail demand for its $2.5bn-$3bn IPO, the world's largest this year.
Such levels of oversubscription ensure sharp rises on the first day of trading, enabling companies to boast of a "successful IPO" and rewarding investors for the long hours spent queuing.
But underneath the triumphalist statements and the quick profits lies a system that has cost retail investors dear in the past.
Most of the retail demand is fuelled by easy access to credit through "margin lending" provided by small brokers. Investors bet that a sharp rise in an IPO's share price in the first days of trading will enable them to sell the stock at a premium high enough to repay the loan with interest, and still net a profit - a practice known as "stagging".
Critics say brokers have an incentive to provide the funds, which are secured against the shares, as they earn commissions on share trading in the IPOs and receive interest on the loan.
When a Financial Times reporter walked into Wocom Securities, a small firm in central Hong Kong, she was told she could borrow as much as HK$1m (US$128,000) to buy China Life shares by putting up just HK$100,000.
The young broker said this 90 per cent margin lending - nearly five times the maximum allowed in the US - would be provided by simply showing a proof of identification and address. "You don't need any [extra] collateral or proof of salary," he said.
At Phillip Securities, another small brokerage, the FT was told the money would be lent at an annual average rate of 2.5 per cent but there was no need to worry because the likely rise in China Life's shares would be enough to repay loan and interest.
Critics say stagging is risky for investors and could hurt the share prices of new listed companies in the long term. As shown by the 1997/98 financial crisis, sudden changes in the market could lead to ruin for small investors who take on too much debt.
"It's a feast or famine effect," says David Webb, a director of the Hong Kong Stock Exchange and a prominent corporate governance activist. "This is a speculative bubble [like] other periodic manias for IPOs such as the 2000 internet bubble and the 1997 Red Chips [mainland Chinese-linked companies] bubble."
Unlike the US, where investors can only borrow up to 50 per cent of the value of the stock they want to buy, in Hong Kong there are no limits to the margin offered by brokers. The main constraint is given by the requirement for brokerage houses to maintain liquid capital of HK$3m with the Securities and Futures Commission, the Hong Kong financial regulator.
The SFC defends this practice, saying it was not charged with overseeing investors. "We regulate brokers, we don't really have much to say about how much investors put in [when trading on margin]," it says.
Brokers and investors may not be the only losers from the easy credit frenzy. Analysts also warn stagging encourages short-term share sales.
Share prices in the aftermath of an IPO can come under selling pressure, especially if a strong debut deters institutional investors from buying the shares. But, as long as offerings keep on rising on their debut, none of this is likely to trouble the investors patiently queuing around the block for the latest hot IPO.
香港再次掀起散户投资热潮
成千上万的香港居民排队数小时认购一家小型中国汽车企业的新股，还有数以百万计的香港人将认购中国最大的人寿保险公司的上市股票。对于这些香港人而言，今年的圣诞节提早到来了。
当地的散户投资者被交易首日可能赚取的优厚利润所吸引，对首次公开发行(IPO)的参与十分踊跃，引发人们担心会出现新的投机泡沫。
长城汽车股份有限公司是一家规模并不大的民营汽车制造企业，其香港IPO的认购超额竟达到680倍以上，这是自二十世纪九十年代后期网络股泡沫以来未曾有过的水平。而预期将面对巨大散户需求的中国人寿保险股份有限公司，更是印制了220万份IPO认购申请表，相当于每三个香港居民一份。中国人寿IPO的融资总额为25亿至30亿美元，将成为今年全球最大规模的IPO。
高涨的认购超额水平，势必使股价在交易首日飙升，使上市公司能为"成功的IPO"而自吹自擂，也使排了数小时队的散户投资者得到回报。
但在以胜利者自居的公司声明和"快速赢利"的背后，散户投资者以前曾为这种方式付出沉重代价。
小型证券公司面向散户投资者轻易提供的"
