JAKARTA - Online broker Futu Holdings Ltd and UP Fintech Holding Ltd will remove their app on mainland China following increasingly sharp pressure from the government on data security and capital flows, prompting heavy sales in their New York-listed stocks.
Chinese regulators have warned the two companies since 2021 that online brokers who do not have licenses in China will commit illegal acts if they serve Chinese clients via the internet.
Shares of Futu listed on Nasdaq fell 7.5% in early trading Tuesday, May 16 while UP Fintech fell nearly 9% after the announcement, reducing some pre-market losses; these two stocks have been under pressure in recent years due to regulatory concerns.
The removal of this application is the latest in a series of measures taken by the Chinese government in recent years to crack down on diverse sectors, and data or information security has become a major concern for authorities.
In the past two months, China has pressured consulting companies and emerging assessment companies by granting investor access to industry experts and investigators who can obtain valuable company information.
Futu, backed by Chinese internet giant Tencent Holdings Ltd, announced last Tuesday that its app would be removed from app stores in China from May 19, while UP Fintech, also known as Tiger Brokers, will be doing the same thing from May 18.
The two companies said their client, already on mainland China, would not be affected by the removal of the app.
The removal of Futu and UP Fintech applications will deter large numbers of retail investors in mainland China from trading securities easily in markets such as the United States and Hong Kong.
Reuters first reported in December 2021 that Chinese officials were planning to ban online brokers such as Futu and UP Fintech from offering overseas trade services to clients in mainland China.
In December last year, China's Securities Regulatory Commission (CSRC) said Futu and UP Fintech had been conducting a security business that violated the law and barred them from seeking new businesses from investors in mainland China.
Both Futu and UP Fintech emphasize that application downloads in other markets are not affected.
"This abolition is unexpected but will not have a material impact on current business operations as the two companies have stopped user acquisitions in mainland China since December 31, 2022," said Hanyang Wang, an analyst with 86Research.
Several Chinese brokerage units in Hong Kong have stopped opening accounts for clients on mainland China after obtaining unwritten guidance from the CSRC, which aims to reduce the flow of illegal money, state media reported in February.
Futu, who has postponed its planned listing of shares in Hong Kong, has licenses in Hong Kong, Singapore, and the United States.
In a separate announcement last Tuesday, the brokerage company said it would expand its presence to Malaysia with an investment platform.
In the 2020 annual report, Futu said that they specifically serve China's new rich population and a large number of their clients are Chinese citizens.
UP Fintech said in their announcement on Tuesday that "in the future, the company will comply with all applicable regulations in mainland China and serve existing clients well".
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