Hong Kong’s Securities and Futures Commission will forge ahead as planned with its margin financing cap despite the brokerage industry’s plea for a delay.
After a three-hour meeting between nine industry bodies and SFC deputy chief executive Julie Leung Fung-yee, the watchdog was left unconvinced but said it would adopt a «light touch» to enforcement.
Effective as of October 4 this year, Hong Kong’s brokers will be required to limit stock margin financing to five times capital. Currently, there is no restriction.
«We are very disappointed that the SFC did not accept our demand to delay the new rule for a year,» said local lawmaker Christopher Cheung Wah-fung,» in a «SCMP» report.
«We will not give up. Our next step forward is to bring the matter to the Financial Services and the Treasury Bureau to urge the government to listen to our demand.»
Bad Timing
According to the chairman of the Institute of Securities Dealers Tom Chan Pak-lam, the timing to introduce the new rule is damning for the industry with brokerage commission income down 30 percent in recent months. Of the 600 local brokerage houses, ten have already shut down with many more beginning to cut staff.
«We are very disappointed that the SFC did not care about the livelihood of the brokers and the negative impact on the stock market,» Chan said.
Hong Kong’s stock margin financing market has ballooned in recent years despite growing macro uncertainty. Between 2006 and 2017, the market surged nine times to reached $26 billion.
