Margin (financing) for Hong Kong IPOs: interest, fees and break-even
Applying on margin means borrowing from your broker to enlarge the application. Costs:
- Interest = loan × annual rate × days ÷ 365;
- Broker handling fee per application (broker-specific, may be zero);
- if allotted, the allotted shares' payable incl. 1.00857% charges (the rest is refunded).
Interest and handling fees are paid whether or not you are allotted. The calculator calls this the fixed cost. "10× margin" means own cash is 1/10 of the amount payable, so the loan ratio is 1 − 1/10 = 90%. Terms vary by broker. Use your broker's fee schedule.
Break-even price is the lowest sell price at which net sale proceeds (after 0.1% stamp duty rounded up to HK$1, trading fee, levies and broker commission) cover the allotted payable plus fixed cost. Expected value = allotment rate × P&L if allotted + (1 − rate) × (−fixed cost).
Since 22 Nov 2023 HK IPOs settle on FINI, which cut pricing-to-trading from T+5 to T+2. HKEX says its pre-funding model reduces funds locked up during subscription. Enter the number of days your broker actually charges interest for.