Hong Kong’s steaming hot IPO market where insiders can tap into billions: Here’s a way in

by trevor bailey

14 September 2020 Editor BUSINESS, FEATURES 0

^{Jack Ma’s listing of Ant Financial on the bourses of Hong Kong and Shanghai is expected in next month and will raise about US$30 billion}

The market for new listings on the Hong Kong Stock Exchange is so hot – HK$87.3 billion raised by 59 new listings in the first half of 2020* – new investors are flooding in. An easy and inexpensive way to gain entry is through Interactive Brokers Hong Kong Ltd (IBKR). The firm quotes Stockbrokers.com in claiming it has the lowest fees of any brokerage in Hong Kong.

Currently front-running in the new listings on the local bourse are Joy Spreader Interactive Technology Ltd, Fulu Holdings Ltd, Fourace Industries Group Holdings Ltd, Macau E&M Holdings Ltd and Yum China Holdings Inc.

For risk takers, Interactive Brokers will enable them to trade on margin. They can leverage existing cash and equity positions by as much as 10 times. As indications of interest rates IBKR charges 1.59% for a loan of US$25,000 or 1.25% for US$300,000. The brokerage warns that this sort of risky trading should only be undertaken by sophisticated investors. Gamblers and the uninitiated may lose their entire investment and more (see below).

^{David Friedland, Hong Kong boss of Interactive Brokers}

You can find Interactive Brokers at 15th floor, Two Pacific Place or through their website interactivebroker.com.hk [or ibkr.hk]. IBKR enables investors to access 135 markets in 33 countries dealing in stocks including ETFs (exchange traded funds), mutual funds, options, futures, currencies and bonds from your own account to all from an integrated account

The technically advanced brokerage has several ways clients can invest. To look at just three:

CLIENT PORTAL: Here with your own account you can see quotes, place trades, see your balance and access performance metrics. Client Portal is typically the entry mechanism for new clients. Client Portal provides a simplified interface designed for less active traders while providing the convenience of viewing your account metrics and/or configuring your account securely.
IBKR MOBILE: This is for investors who like to monitor their position 24 hours a day. You download one app and find you have instant access to 135 markets in the palm of your hand.
TRADER WORKSTATION (TWS) is an institutional level desktop trading platform designed for active traders who trade multiple products. TWS has advanced algos and trading tools under the hood.

^{Yum China’s IPO in Hong Kong earlier this month raised about US$2.2 billion}

How much commission does IBKR charge? On Hong Kong stocks there is a sliding scale starting at 0.08% but quickly drops to 0.05% and further for active traders.

To access the IPOs streaming onto the local bourse you have to be deemed by IBKR as a “qualifying client”. The brokerage wants to be sure you have deep enough pockets to honour your commitments. To apply for shares in a forthcoming IPO set up an account and go through IBKR. If you are successful, you will be able to trade in your shares on listing day and thereafter.

A cautionary tale: This writer decided to experiment with gold futures trading. He bought a $20,000 position at the beginning of the Iran-Iraq war. It seemed to be a textbook time to go long on gold. He was stop-lossed out. The $20,000 went poof!

* KPMG analysis