Hong Kong-listed brokerages fall on report of mainland China client ban

SHARES in Hong Kong-listed brokerages fell on Monday (Feb 13) after state media reported that Guotai Junan International had suspended the opening of accounts by mainland Chinese clients, potentially hitting its business.

A source at Guotai Junan International’s Shanghai-based parent said the move followed unwritten guidance from China’s securities regulators aimed at discouraging illegal money outflows.

It also came after the China Securities Regulatory Commission (CSRC) banned online brokerages Futu Holding and UP Fintech Holding from soliciting new business from mainland investors on Dec 30.

Mainland investors are an important source of revenue for Hong Kong-based brokerages, so the ban would have a negative impact on future businesses, said the Guotai Junan source.

Guotai Junan’s Hong Kong-listed shares fell roughly 0.7 per cent. Guolian Securities and Haitong International lost more than 3 per cent each.

Meanwhile, Hong Kong-based Bright Smart Securities said it would suspend mainland clients’ accounts starting from Feb 16 until further regulatory guidance is given, according to a notice sent to clients viewed by Reuters.

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“Considering China’s regulators said some Hong Kong brokerages conducted illegal cross-border business, we have to wait for regulators to clarify relevant rules,” the brokerage firm said in the letter to clients.

Guotai Junan and Bright Smart did not immediately reply to Reuters requests for comment.

Shares in Bright Smart tumbled roughly 12 per cent.

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Mainland Chinese can buy overseas securities via official channels such as the cross-border investment scheme QDII, and the Stock Connect programme.

However, many Chinese open stock trading accounts in Hong Kong, potentially bypassing China’s strict capital control.

The CSRC has said that Futu and UP Fintech Hong Kong have conducted cross-border securities businesses involving domestic investors without regulatory consent, contravening Chinese laws. REUTERS