China investors rush for exit after crackdown on illicit overseas stock trading.
Chinese investors are rushing to find alternative ways to buy and sell overseas equities after Beijing launched its most forceful crackdown on illicit cross-border stock trading to stem capital outflows.
Mr Richard Wang, who works in artificial intelligence in the US and has around US$120,000 (S$153,000) in stock holdings with Futu Holdings, said he dumped his US stocks on May 22 after China moved with its most stern action yet to plug capital control loopholes. He is waiting for the Hong Kong market to open again on May 26 to sell his remaining positions.
The surprise triggered swift reactions on May 22, with the Nasdaq Golden Dragon China Index slumping 2.2 per cent, as shares of Futu plunged 28 per cent. The wealth of Mr Leaf Li, Futu’s billionaire founder and chief executive officer, slumped by US$1.7 billion to US$4.7 billion as at May 22.
he fallout is likely to spread to Hong Kong when the market reopens as the move threatens to curb the city’s liquidity and its booming initial public offerings (IPOs) amid dwindling demand from mainland Chinese investors.
An estimated US$1 trillion of so-called hot money flowed out of China in 2025, according to an index compiled by Bloomberg Intelligence – the biggest annual outflow since data began in 2006.
CITIC Securities estimates that the clampdown could affect as much as HK$250 billion (S$40.7 billion) of assets in Hong Kong, with Futu alone accounting for around HK$150 billion to HK$180 billion. Futu underwrote 30 IPOs in Hong Kong in 2026, more than any other banks.
The crackdown marks an escalation from late 2022 when China ordered online brokers to rectify illegal business activities and stop onboarding new onshore investors, signalling growing impatience with the cross-border flows. The China Securities Regulatory Commission, the nation’s top securities watchdog, on May 22 slapped more than US$330 million of combined fines on Futu, UP Fintech Holding’s Tiger Brokers and Longbridge Securities for operating on the mainland without a licence.
Investors like Ms Daisy Qin, a bank employee in Chengdu, have managed to circumvent the 2022 directive and set up new accounts using falsified documentation. Ms Qin said she opened an account with Futu in 2025 using address details of a Hong Kong friend so she could subscribe to IPOs in the city.
She rushed to check with other brokerages at the weekend for workarounds, only to find out that the account opening requirements had been further tightened. Now she is ready to dump all two million yuan (S$376,000) worth of shares.
Source: straitstimes