Lending Opportunities Grow for Chinese Tech Giants as Hong Kong Announces Dual-Class Shares

Last week Hong Kong Exchanges & Clearing Ltd announced rule changes to allow technology firms that have shares with different voting rights to go public in Hong Kong, continuing the trend for lending opportunity growth in Hong Kong and the broader APAC region.

The move overturned rules that barred the likes of Alibaba Group Holding Ltd from listing in Hong Kong. HKEX chief executive Charles Li said several Hong Kong listings are already planned under the new rules. The rule changes are positive for securities lending, apart from the potential growth in Hong Kong lendable supply as new companies list. There should also be a positive impact on lending returns as newly issued IPO shares often trade at elevated fees.

The volatility seen at the beginning of 2018 has led to an increase in demand as hedge funds manage downside risk through reallocation to the short side. The increase in lending demand, when set against a backdrop of high asset valuations, has meant APAC intrinsic returns for beneficial owners continue to grow year on year.

The trading desk expects to see lending opportunities from several Chinese technology giants, who are preparing to go public following the HKEX rule changes, including Xiaomi Corp, Ant Financial Services Group and Lufax, the peer-to-peer lending unit of Ping An Insurance (Group) Co. Evolving regulatory developments, combined with generally favourable market conditions, continue to underscore the trend for long-term growth seen in APAC lending returns.