IN HONGKONG supposedly only one in 10 persons earn enough to pay the full rate of tax but, surprisingly enough, a lot of investors could together lay their hands on $240 billion to punt on the recent public offering from Denway Investment.
Denway was 657 times oversubscribed and left a huge hole in Hongkong's monetary system. For the statistically minded, the oversubscription represented about 40 per cent of Hongkong's GNP.
Obviously a lot of the potential investors are institutional investors but many were individuals hoping to make quick profit from the shares.
So where does the money come from? It comes from extremely flexible lending arrangements by mainland Chinese banks.
Anybody can wander into the securities department of Yien Yieh Commercial Bank and borrow a maximum of $20 million to subscribe for new shares without any security or establishing his or her financial position.
All you are required to do is lay down a deposit of five to 10 per cent of the amount you borrow and a couple of hundred dollars for the general expenses. The interest rate will be around two per cent above the Hongkong inter-bank offered rate (HIBOR).
