HK IPO Subscriptions

IPO Subscription of Hong Kong Stocks

Company listing, also known as initial public offering (IPO), refers to a company’s initial offering of shares to the public at an issue price within a preset range for fund raising. “IPO subscription” means that investors participate in the subscription of IPO shares and have the opportunity to buy stocks on the day of listing at the finalized issue price.

To go public on Hong Kong Main Board, a company shall submit an application to the HKEX. An IPO includes international placement and public offering. International placement refers to direct sale to professional investors (Generally, institutional investors or large individual investors), including cornerstone investors and anchor investors. Shares placed to cornerstone investors are subjected to a lockup period of half a year. According to the relevant listing regulations, international placement accounts for up to 90% of the entire issuance and the remaining is for public offering to retail investors. In addition, there is a clawback mechanism. The proportion of public offering will be increased in case of over-subscription by public offering. The public offering can account for up to 50% of the total issuance, to ensure that retail investors have sufficient opportunities to participate.

The allocation mechanism for the public offering of Hong Kong stocks is based on a tiered system, which tends to be the Generalized System of Preferences such that each participate is able to allocate at least one lot. However, popular new stocks will attract too many investors, resulting in a lower allocation rate. The allocation results will be disclosed on HKEX website.

Advantages of Hong Kong IPO Subscriptions

Low Barriers
Hong Kong stocks are different from A shares. There is no market value requirement to investor’s account. You may participate into IPO subscription as long as there is sufficient cash in your securities account.

High Allocation Rate
IPO subscriptions of Hong Kong stocks are biased towards small and medium-sized investors. When subscribing to the same new stock, the company will allocate each investor for one lot as far as possible. In the past two years, the average ballot winning rate for one lot in Hong Kong IPO subscriptions has been above 50%.

Leveraged Financing Subscription
To increase the ballot winning rate and the number of winning lots in Hong Kong IPO subscription, investors may use leveraged financing subscriptions, which refers to use margin loan from broker to subscribe lots. Financing subscription has higher handling fee plus financing interest.

How to participate in IPO subscription
1. IPO subscription in CNF:
The subscription can be completed via mobile APP, or phone order.
IPO subscription in CNF supports cash subscription and financing subscription.
Funds: The subscription funds need to be frozen, and the due amount will be deducted after the allocation is announced. (When two stocks are subscribed at the same time but the funds are insufficient, the subscription is confirmed in the order of the subscription deadline.)
Subscription time: The subscription is available 24 hours a day during the subscription period, and the order can be modified or cancelled before the deadline as announced.
Quantity: The subscription quantity is prescribed by HKEX using tired system,and is different for each stock. Generally, the minimum subscription quantity is one lot, but it could be 100 shares,200 shares,or 1000 shares per lot. The available subscription quantity and amount is case by case, investors can use financing subscription.
2. Cut-off and deduction date for IPO subscription in CNF:
The deadline of IPO subscription in CNF is 04:00PM on CNF subscription cut-off date (The day before the Exchange cut-off date). All applications submitted before 04:00PM on the cut-off date in CNF will be deducted from 04:00PM.
All subscription applications can only be modified or cancelled before the deduction starts.
3. Announcement of the allocation result and refund:
Announcement and allocation: The allocation rules are determined by HKEX and disclosed on the website of HKEX. The result is subject to the daily statement. The IPO stock holdings will be reflected in the daily statement of the announcement date.
Cash subscription: If the application is partially allocated, the remaining amount will be refunded to the account. In special circumstances, the refund date will be subject to the announcement of HKEX.
Financing subscription: If the due amount is lower than the investors’ account balance, the excess amount will be returned to the subscription account on the day that the result is announced.
4. Handling fee and funding cost of IPO subscription in CNF:
Handling fee for cash subscription is 100HKD per cash subscription and 150HKD per financing subscription, irrespective of the allocation result. If there are suspension or postponement of the IPO, the handling fee and funding cost will not be refunded.
Funding cost = funding amount * accrual duration * interest rate.
The interest rate is subject to the subscription information page.
The accrual duration is subject to the calendar day before the announcement date. The financing amount will be refunded after the announcement date. If the due amount is more than the available cash balance, the remaining will be financed by CNF. Please be aware of the risk that if this causes the account risk status to be“margin call”, CNF reserves the right to liquidate positions in the account.
The funding cost will be settled on the day of announcement and allocation.Please refer to the statement for the final deduction.
In the event of suspension or postponement of the IPO, the commission fee and funding cost will not be refunded.
CNF has no obligation to disclose any terms or condition set out in the IPO documents ("Prospectus") to investors. For IPO subscriptions, investors shall confirm that they have obtained the “Prospectus”from other parties, have read and understand all of the terms and conditions, and their subscription will not violate any of the terms or conditions. Investors shall confirm that they are qualified for subscription under the relevant securities regulations; and they are not any of the related parties of the certain IPO issuers (as defined under regulatory rules).