What can a bank offer the successful chief executive who has just listed his company and become a multimillionaire or billionaire? For financiers in Asia chasing closer ties to the region’s wealthiest people, the answer is proving simple enough: cash to bet on China’s soaring markets.
Financing tycoons is a lucrative and growing business in Asia that is tempting investment banks including Goldman Sachs and Morgan Stanley to muscle in. They join a crowded field of existing players such as UBS, Credit Suisse and Citigroup, which all have big private banks.
Lending on margin to retail investors is the rocket fuel powering the soaring markets in Shanghai and Shenzhen. Financing tycoons works on the same principle — banks make loans using shares as collateral and borrowers can be asked to top up if values fall — but the sums involved can be more than $1bn a pop. One senior investment banker calls it “one of the last juicy products out there”.