The Shanghai-Hong Kong Stock Connect is giving brokers in the former British colony an opportunity to expand their customer base and make more money. But to attract investors from the mainland, Hong Kong brokers are also being innovative.
Hong Kong brokerages are luring Chinese investors to open accounts in the city by offering lower margin financing costs, bigger loan value to cover their stock purchases, among other incentives.
According to Bloomberg, while brokerages in China slap borrowers with an 8% interest on margin financing, their Hong Kong peers are charging less than that, with some as low as 7%. On the loan amount, Hong Kong brokers offer funding to cover as much as 80% of stock purchases, while in China it is up to 70% only.
Other brokers such as Bank of China’s Hong Kong subsidiary are waiving their fees and offering lower rates for margin financing, Bloomberg said. Another one promises to reimburse travel costs.
These promotions signify the intense competition among brokers operating in the city to sign up more mainland investors. And the competition could get more intense, and the incentives more innovative, once the vehicle linking Hong Kong and Shenzhen exchanges is implemented later this year.
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