Following the sudden postponement of Ant’s initial public offering, local authorities, asset managers and retail investors in Hong Kong are scrambling to deal with the excess liquidity at hand as well as unfilled share allotments. 

Ant’s public listing in Hong Kong reportedly attracted HK$1.3 trillion ($168 billion) in orders – around 390 times the shares on offer – driven by an orchestrated financial effort involving both the city’s central bank as well as numerous brokers, lenders and asset managers.

But just weeks after green-lighting the fintech giant for listing, regulators reversed their decision and the city is now attempting to unwind the excess liquidity. 

HKMA: Absorb Liquidity

Contrary to some initial beliefs earlier this year that ongoing unrest would weaken the local currency, the Hong Kong Monetary Authority (HKMA) found itself having to sell one that was too strong (it bought 24.6 billion U.S. dollars in October), in part due to growing demand to invest in blockbuster listings. 

But it is now expected to absorb the excess liquidity from Ant’s halted listing by selling debt in addition to the HK$829 billion ($236 billion) already planned for this quarter, most of which is used to roll over maturing debt.

Lost Interest

The Ant IPO attracted considerable interest and confidence with some financial firms reportedly offering as high as 20 times leverage to buy into the shares – an amount that would require just a 5 percent correction to reach margin call. But the pullout will now force lenders and their investors to deal with the outstanding interest payments.

Three major stockbrokers – Bright Smart Securities, Philip Securities and Futu Securities – said they would waive part or all of the interest payments linked to HK$120 billion ($15.5 billion) in margin loans, according to an «SCMP» report. In total, banks and the 600-strong brokerage industry extended HK$500 billion ($64.5 billion) of margin financing loans at a reportedly wide interest rate range of 0.48-3.5 percent.

Hong Kong’s 1.55 million retail investor applicants of Ant's IPO will also be receiving refunds from the local bourse and the securities regulators in full, according to an exchange filing.