FINANCIAL SERVICES | Staff Reporter, Hong Kong

Hong Kong margin loans balloon nine-fold to $26.3b in 2017

The regulator has expressed concern about the risks associated with rising bad loans.

Bloomberg reports that outstanding margin loans or borrowing against pledged stock has ballooned nine fold to $26.3b (HK$206b) at the end of 2017, prompting the Securities and Futures Commission to consult brokers about the associated risks in rising credit.

The regulator has expressed concern that higher levels of lending poses a great risk given that many of the involved firms are illiquid which means that it may take a while for brokers to recover money in case of liquidation.

Also read: Banks scrap fixed-rate mortgages as interbank lending rates surge

“In a forced liquidation situation if it is illiquid, it means it takes several months if not years to complete,” said Deputy Chief Executive Officer Julia Leung. “The risk to the broker is not small.”

Share pledges by firms’ major shareholders contributed to the increase in margin loans, she said. These are companies listed on the city’s small cap exchange, or companies outside Hang Seng indexes, said Leung.

Here’s more from Bloomberg

Do you know more about this story? Contact us anonymously through this link.

Click here to learn about advertising, content sponsorship, events & rountables, custom media solutions, whitepaper writing, sales leads or eDM opportunities with us.

To get a media kit and information on advertising or sponsoring click here.