Shares of US-listed Chinese online brokers plunged as the central bank warns of...

Shares of US-listed Chinese online brokers plunged as the central bank warns of offshore trading

Shares of US-listed Chinese online brokers plunged as the central bank warns of offshore trading

October 29, 2021 1:14 am

The stock prices of US-listed Chinese online brokers UP Fintech Holdings and Futu Holdings plummeted, after a senior official of the People's Bank of China said that their cross-border online brokerages operating in the mainland are illegal.

Details:

Sun Tianqi, the head of the financial stability department of the People’s Bank of China, told a forum in Shanghai that offering securities-brokerage services to mainland Chinese investors without obtaining the required licenses was “illegal financial activity.”

Tencent-backed Futu and Alibaba-backed UP Fintech (also known as Tiger Brokers) don't have brokerage licenses in mainland China, but they allow Chinese citizens to open accounts after providing personal information such as ID cards, bank cards, and tax records.

As of 1:13 pm New York time, Futu's stock price fell by about 15% to $56.6, while Tiger's stock price fell by about 17% to $7.28.

The central bank is watching closely on cross-border online brokerage business. Last week, it pointed out that Tiger and Futu could face regulatory risks when a new personal data privacy law comes into effect.

Context:

Due to the expansionary monetary policy caused by the Covid-19 outbreak, the retail investing craze has become a global trend and brokerages have witnessed substantial growth.

In Futu's latest earnings report, the company said that the number of registered clients reached 2.32 million, a year-on-year increase of 142.5%, and total revenue in the second quarter increased by 129.3% year-on-year to $203.1 million.

Tiger said the total number of customer accounts increased from 743,000 in the same period last year to 1.4 million in the first quarter of this year.

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