(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

HONG KONG - Hong Kong is screaming out to Chinese companies. The Asian financial hub’s mom-and-pop investors ordered more than 360 times as many shares of $58 billion NetEase as were on offer. Cheap money is distorting markets everywhere, but abundant and exuberant retail buyers make the case for additional secondary listings easier.

NetEase follows e-commerce goliath Alibaba in taking advantage of relaxed rules for mainland companies to sell shares in Hong Kong. Online retailer JD.com just raised $3.9 billion to be the third. There is already a strong desire to establish a second trading base outside New York as an insurance policy against increasingly hostile U.S. lawmakers. Blowout receptions add to the appeal.

Everyday investors in Hong Kong were initially allocated just 3% of the $2.7 billion NetEase shares being flogged. Their keen interest tipped the scales. By rule, when the local retail portion is 20 times oversubscribed, the allotment expands to 12% at the expense of international backers. The stock popped 10% in its Hong Kong debut on Thursday.

Many factors contributed to feverish demand. NetEase’s business is virus-resistant. Resurgent equities also played a part; the S&P 500 Index has soared 43% since hitting a three-year low in March, and Hong Kong’s Hang Seng Index is up 14% over the same timeframe.

A dearth of new stocks has investors clamouring for nearly anything. Even Alibaba’s secondary listing last November was “only” 42 times oversubscribed. Ever-looser monetary policy has left more cash sloshing around. Indicative of the high spirits, Nasdaq-listed shares of Chinese real-estate company FANGDD Network closed nearly 400% higher on Tuesday, possibly because its name sounds like the acronym for U.S. tech dynamos Facebook, Amazon, Apple, Netflix and Google.

The influence of retail investors in the United States, increasingly using apps such as Robinhood, could wane again. In Hong Kong, though, individual punters are a steady force. They account for as much as a fifth of equity trading in a good year, according to stock exchange filings. And heated times like these often translate into additional borrowing on margin to juice stock purchases. For dozens of other U.S.-listed Chinese companies, Hong Kong clearly is rolling out the red carpet.

 

CONTEXT NEWS

- Chinese video-game publisher NetEase said on June 10 that the retail tranche of its Hong Kong secondary listing received orders for more than 360 times as many shares as it was offering.

- The shares began trading on June 11 at HK$133 ($17.16), up 8.1% from the HK$123 offer price.

- The company, which raised $2.7 billion, received 371,075 valid applications for nearly 1.9 billion shares from retail investors. Only about 5.2 million were made available to them, according to documents submitted to the stock exchange.

- Under Hong Kong rules, if the retail tranche of an offering is more than 20 times oversubscribed, more shares are moved from the international allotment to domestic investors.

- As a result, NetEase said it made an additional 15.4 million shares available to Hong Kong buyers, increasing the amount to 20.6 million, or 12% of the total.

- The international offering was also oversubscribed by roughly 14 times, the company said.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Jeffrey Goldfarb and Sharon Lam) ((alec.macfarlane@thomsonreuters.com; Reuters Messaging: alec.macfarlane.thomsonreuters.com@reuters.net))