Futu Stock Crashes Nearly 38% After China Crackdown

Futu stock crashed nearly 38% on Friday after China’s securities regulator moved against offshore brokers that channel mainland money into US-listed shares. The action hit the US-listed parent immediately, while mainland investors faced a tougher route into those shares over a two-year enforcement push.

Three brokers in the crosshairs

The China Securities Regulatory Commission said it had opened cases and issued advance notice of administrative penalties against entities tied to Tiger Brokers (NZ) Limited, Futu Securities International (Hong Kong) and Longbridge Securities (Hong Kong). It also said it moved to confiscate the profits of three brokers that served mainland investors without a license.

The firms were said to have conducted securities marketing, processed trading orders and earned revenue in China without brokerage or margin-trading licenses. The regulator said they also breached fund and futures statutes, and it intends to confiscate all illegal gains and impose severe penalties.

UP Fintech slips 36.64%

UP Fintech Holding, the operator of Tiger Brokers, was plunging 36.64% on Friday morning. The market penalty landed on the listed parents even though the action targeted specific operating subsidiaries, a split that left Futu Holdings and UP Fintech under immediate pressure while the regulatory cases stayed focused on the broker units.

Shares of Chinese carmakers also fell in US pre-market trading on Friday, with Nio down 6.08% and Li Auto off 5.37%. XPeng was declining by more than 2%, while Pinduoduo fell 4.35%, Alibaba 3.66%, JD.com 3.40% and Baidu 2.59% as the selling spread across US-listed Chinese stocks.

Two-year shutdown plan

The CSRC unveiled a two-year plan to shut down illegal cross-border trading entirely, adding a longer timetable to the crackdown already under way. The parties kept the right to defend themselves and request a hearing, but the regulator’s push now threatens the offshore trading channel mainland investors have used to buy US-listed Chinese stocks.