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

Bright Smart Securities & Commodities

13/02/2023 08:15

(Adds Bright Smart Securities news)
       SHANGHAI, Feb 13 (Reuters) - Shares in Hong Kong-listed
brokerages fell on Monday 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  FUTU.O 
and UP Fintech Holding  1M5y.F  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  2611.HK  fell
roughly 0.7%. Guolian Securities  1456.HK  and Haitong
International  0665.HK  lost more than 3% each.
    Meanwhile, Hong Kong-based Bright Smart Securities  1428.HK 
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.
    "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%.
    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.
 (Reporting by Samuel Shen, Jason Xue and Brenda Goh; Editing by
Shri Navaratnam and Mark Potter)
 ((samuel.shen@thomsonreuters.com;  +86 21 20830018; Reuters
Messaging: samuel.shen.thomsonreuters.com@reuters.net))