Brokers use up margin lending for retail investors seeking a piece of the hot stock This week's share issue by China Construction Bank looks set to become a hit among retail investors, according to brokers, who say clients are scrambling to secure financing for the deal even though it does not open until Friday. Market talk yesterday suggested some brokerages had 'used up' their margin financing capacity for the CCB offer. While those accounts seemed a little premature, all indications were that the level of interest in the first of China's Big Four banks to go public is extraordinarily high. Sun Hung Kai Securities said it had received $5 billion in 'verbal orders' for margin financing for CCB and expected to see more in the coming days. By comparison, the brokerage provided $4.5 billion in margin financing for Bank of Communications' launch in June. Margin financing allows retail investors to leverage on their orders to multiply their potential profit. Investors can borrow up to 90 per cent of the subscription amount. Sun Hung Kai Securities executive director Edmond Chau, said there had been hundreds of inquiries about CCB's offering, but how much the brokerage would finally lend depended on its own bank funding and borrowing rates. Ben Kwong Man-bun, a director at KGI Securities, said: 'Our orders on hand tell us that our planned margin lending facilities are definitely not enough. We will try to borrow more funding from banks to satisfy the demand.' He did not disclose the value of orders received so far but noted that interest was 'enormous' and would undoubtedly break the firm's past margin lending record. Based on experience, KGI provides margin financing of $4 billion to $5 billion for 'hot' offerings. Such numbers suggest each brokerage could comfortably cover the entire $2.97 billion retail tranche on its own. CCB is aiming to raise as much as $59.59 billion, with 5 per cent of the shares earmarked for retail investors. In case of strong demand, the bank can increase the retail tranche to a maximum of 20 per cent at the expense of institutional investors. That will require a retail subscription rate of more than 100 times, resulting in CCB's offer freezing more retail cash than the record $280 billion tied up by Link Reit's offering in December last year. While not at all impossible, one reason CCB may not match those numbers is that short-term interest rates, at about 4.3 per cent, are more than eight times higher now than when Link Reit was last in the market. 'We are hoping to negotiate a rate below 5 per cent, but we don't know yet if that is possible,' said Louis Wong Wai-kit, a director at Phillip Securities. Meanwhile, the CCB deal yesterday got a bit more affordable for small-scale investors who do not want to borrow to be able to subscribe, as it was understood that the stock exchange had approved an application to cut each board lot to 1,000 shares from 2,000. That would reduce the minimum subscription amount to $2,299.50 from $4,599. Separately, HSI Services said yesterday that it would not be possible for CCB to join the blue-chip Hang Seng Index as the index provider would continue to regard H shares as a separate class of equity that were not eligible for inclusion.