China To Tighten Regulations On FinTech Brokers
Futu Holdings Ltd and UP Fintech Holding Ltd plunged premarket Friday after a Reuters report said Chinese regulators are preparing to crack down on the digital brokerage companies.
Reuters said the brokerages would likely be notified of a platform ban, blocking mainland China customers from investing in foreign markets in "the coming months." Regulators are worried about data security risks to mainland customers who have to enter their ID cards, bank cards, and tax records to use the platforms. They're also concerned about capital outflows.
The Nasdaq-listed Chinese brokerages were down considerably in the premarket hours. Futu is down more than 9% and Up Fintech -12%.
In October, state-run media People's Daily said these brokerages collect large amounts of personal data were at risk of being acquired by the U.S. Securities and Exchange Commission.
Futu responded to the Reuters report by calling it "media speculations" about future policies damaging its business.
"The company has been operating steadily and will continue to serve existing and new clients," Futu said. The company added that it's complying with regulators and said it's aware individuals and institutions have been spreading "fake news" to profit from "short-selling" the stock.
Beijing's years-long crackdown on technology companies has halved the Nasdaq Golden Dragon China Index. Deteriorating Sino-US relations has also pressured the index lower.
While Reuters reports an imminent crackdown, the online brokerages have said they haven't received any notice from Chinese regulators that may harm their business.
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