What is Hong Kong stock short selling
Short selling in securities is the most basic way of short selling in HK stocks, which is a short position of stocks. When an investor does not hold a particular stock but believes its price will fall in the future, they can use cash or securities in their account as collateral to borrow the stock from the broker and sell it. When the price drops, they can buy back the same quantity of the stock at a lower price to return it to the broker, thus profiting from the difference between selling high and buying low.
How to Apply for Short Selling of Hong Kong Stocks
If you already have a margin account, you can apply for short selling permission in the Tiger Trade APP by clicking "Positions - More - Hong Kong Short Selling," or you can find "Hong Kong Short Selling" on the "Market - Stocks - Hong Kong" page.
The first application requires signing the "Stock Borrowing and Lending Agreement" with Tiger Broker and registering with the Hong Kong Inland Revenue Department, along with paying a registration fee of HKD 270. Once the application is completed, you are eligible to use short selling service.
Once the short selling service activated, you still need to wait for the Hong Kong Inland Revenue Department to return the registration approval result, which is expected to take about a month. For short selling transactions conducted before IRD approval granted, Tiger Broker will collect stamp duty on borrowed and returned securities on behalf of IRD, which amounts to 0.13% of each transaction amount. This portion of the stamp duty will be refunded to your account once IRD approves the application. Please note that if IRD does not approve the application, Tiger Broker will not refund the HKD 270 registration fee or the stamp duty on borrowed and returned securities.
Securities lending interest
Since the stocks sold by the investor are borrowed from the broker, a certain interest must be paid to the broker (starting from T+2 days after the short sale transaction).
The formula for calculating borrowing interest is:
Stock Borrowing Interest =Stock Collateral Amount × Stock Borrowing Daily Interest Rate
Stock Collateral Amount = Stock Closing Price × 105% (rounded up) × Number of Shares Held
The short selling rate for individual stocks in Hong Kong is dynamic, meaning it will adjust based on the degree of risk of the stock, the liquidity of the stock and the difficulty of borrowing (the number of stocks available for lending). When stocks fluctuate greatly and there are too many short sellers, it will cause the interest rate of securities lending to rise, and sometimes the interest rate may exceed 100% . Under normal circumstances, if the stock price trend is stable and the short-selling pool is abundant, the interest rate will be relatively stable and cheap.