Blockbuster IPOs set to trigger cash crunch

A cash crunch looms as Xiaomi moves for a public debut which could push Hibor rates.

Bloomberg reports that smartphone maker Xiaomi’s blockbuster public debut could give rise to a cash crunch in Hong Kong’s $5.6t equity market and push Hibor rates up.

Xiaomi is reportedly gunning for an IPO that’s expected to raise at least $10b which runs the risk of locking up funds of subscribers. The cash crunch was felt when insurer Ping An Good Doctor locked in retail investors for its $1.1b IPO which led to a spike in one-month Hibor rates as well as when China Literature Ltd went public last November.

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“We could expect a very notable increase in Hibor if an IPO is very oversubscribed,” Man said. “Hong Kong dollar funding conditions could tighten temporarily during an IPO process -- this tightening of funding conditions usually lasts until the IPO process is over.”

A listing of that magnitude could also pump downward pressure on the local stock market, said Hao Hong, chief strategist at Bocom International Holdings Co. in Hong Kong, adding that the IPO would further cap the money that could otherwise be chasing stocks.

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