① When the leverage ratio of the IPO Subscription funds exceeds 90%, does it mean that the issuance pricing has deviated from the fundamentals and evolved into a capital-driven game? ② Under the current system with no leverage cap, how can brokerages form a systemic risk loop through 'financing concentration - collateral valuation - closing chain reaction'?
According to Caijing Press on March 20 (Editor Hu Jiarong), the Hong Kong Securities and Futures Commission will launch significant reforms to the IPO financing rules on March 20, 2025. According to related news, the regulatory authorities plan to adjust the upper limit of IPO subscription financing ratio from the current unrestricted state to a maximum of 90% (i.e., investors need to pay a 10% margin) and innovatively introduce a stock collateral mechanism as a risk hedging tool.
As one of the major Global IPO markets, Hong Kong has seen a surge of leverage trading bubbles due to the listing boom of Technology and new Consumer stocks in recent years. Looking back at the peak period of Technology stocks listing in 2020-2021, some IPO projects leveraged retail investors' margin financing up to several dozen times to boost subscription multiples. Although this model temporarily activated market liquidity, it led to the accumulation of systemic risks.
Mixue Ice City IPO may become a typical case.
During the subscription phase for the Mixue Ice City IPO, Futu Securities and other brokerages provided a maximum financing leverage of 200 times, stimulating retail capital to create a siphon effect, ultimately locking the financing subscription multiple at 5125 times, with frozen funds of 1.77 trillion HKD, breaking the record previously held by Kuaishou (1.28 trillion HKD).
Liquidity imbalance: Futu Securities contributed 59% of the subscription funds (1.06 trillion HKD), and market liquidity was excessively concentrated on a single symbol, forming a 'brokerage-client' risk transmission chain.
System pressure testing: Several brokerage trading systems collapsed during peak subscription periods.
The contradiction between leverage and the risk of breaking issuance: Although the stock price of Mixue Ice City soared by 43.21% on the first day of listing, under high leverage conditions, if the new stock breaks issuance, investors may face forced liquidation pressures, triggering a chain selling.
In response to the regulatory gaps exposed by the IPO of Mixue Bingcheng, the Hong Kong Securities and Futures Commission has completed stress tests on 8 key Brokerages, and the review results and supporting details will be announced shortly.
Today, after hitting the high near 24,000 in the early session and entering bearish positions, the index fell sharply by nearly over 600 points, immediately recouping yesterday's losses significantly.
Moreover, today it broke the new high again, reaching a maximum of 24,076, but by the end of the market, it fell back by about 70 points, producing a bearish candle. The current trend has not yet been broken, but from the previous low until now, it has risen close to 6,000 points. It is believed that those with positions can continue to hold until there is a clear trend reversal for profit-taking. Those without positions can wait for a pullback to get in. Actually, it is hoped for a quick pullback, as it allows for entry and also provides a healthy breath.
Currently, the outlook remains the same as before. It is believed that even if there is a pullback, it shouldn't be too deep. However, if Futures fail to stabilize and close below 22,350, there may still be room for decline. The chance of Futures falling below 21,400 in the short term should be low, so it is considered that if a significant pullback occurs, it presents a good opportunity to incrementally go long. Recently, there has been a consistent approach to not hold positions overnight, only focusing on immediate trades, as there is no high chasing and no casual short selling.
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