Stock Borrowing & Lending
Stock Borrowing & Lending allows investors to capture opportunities even if the market is going through a downward trend. Investor foresees the stock price will decline and borrow stock at target price with a loan interest and sell in the market. If the price dropped as predicted, investor can buy back that stock at a lower price and make profit with the price difference by deducting the trading and interest costs.
Advantages

The bid-ask spreads is lower

Can make profit without relying on the liquidity provided by distributors

Will not be affected by the factors of volatility and outstanding volume

Stock Borrowing & Lending Process

Borrow Stock:

  • Open a short sell account with CHIEF
  • Enquire CHIEF if the desired stock is available for short selling;

Short Selling:

  • Once stock borrowing is confirmed by CHIEF, you can contact designated staff to make short sell instruction
  • Initial margin is required to deposit before 5:00pm on T day; (For example, 1000 shares of Tencent (#00700) are successfully sold (Selling price $100), initial deposit: 125%, where 25% of the transaction amount is $25,000 and 100% is principal of short sell)
  • The calculation of SBL Loan interest start at settlement day (T+2)

Stock Return:

  • You can buy back through Internet or our staff. After that, you must inform CHIEF, otherwise the return process will not be completed
  • The loan fee will be deducted from the short sell account at settlement day (T+2)

*Short Selling Examples

Example 1:
Maintenance Margin is 115% of market value
If Tencent (#00700) price rises to $110
Margin ratio = 114% [125,000 / (110*1000), lower than 115%]
Since the margin ratio is lower than 115%, Margin deposit is needed.
Deposit amount= $11,250 [1.25 * (109 * 1000) - 125,000]

Example 2:
If Tencent (#00700) price falls to $90
Margin Ratio = 139% [125,000 / (90 * 1000), larger than 115%]
No margin deposit is needed.

Importance
  • Short sell order can only be made when stock borrowing is confirmed by CHIEF
  • The short sell order must be conducted in continuous trading session, and the selling price must not be lower than the ask price
  • If the price keeps rising, the client will bear unlimited floating loss
  • If the dividend payment occurred, the company will deduct the dividend from your account at the Ex-Dividend date
Charges
SBL Registration Fee $300 (Include $270 First Registration Fee and $30 administration fee)
Administration Fee $100 (Given that stock borrowing or lending is executed from January to June / July to December)
Loan Fee Differ from stock and subject to minimum charge
If you have any queries, please contact our customer support hotline (852) 2500 9199 (852) 2500 9199.
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