Futu and UP Fintech's Tiger Brokers face a regulatory threat to their core mainland Chinese business. China's CSRC and seven other government departments launched a crackdown on illegal cross-border securities, futures and fund business, opening investigations and issuing advance penalty notices against Futu, Tiger Brokers and Longbridge. They are accused of providing brokerage, margin financing, fund sales and futures services to mainland investors without approval. x.com 

China's ban on offshore brokers serving mainland residents means a long-term liquidity drain for Chinese ADRs and Hong Kong stocks. Eight ministries jointly barred foreign institutions from cross-border securities services; existing users can only sell for two years before forced account closure, and Futu was fined up to 1.85 billion yuan. With mainland retail investors' route overseas sealed off, new money will find it increasingly hard to enter these markets. x.com 

Futu's valuation logic has changed after China's proposed RMB 1.85 billion penalty, about $270 million or roughly 15% of a year's net profit, plus RMB 1.25 million for founder Li Hua. Per JPMorgan, which cut its target from $300 to $87 and downgraded to neutral, Futu is now a regional licensed broker, not a high-growth fintech, so its growth premium is largely gone. Mainland accounts are just 13% of the total. The May 28 Q1 report on the mainland wind-down and overseas growth is the key test. … Show more

Webull faces a national-security overhang from its China ties. Per CNBC, citing House congressional panel findings, Webull's China ties are a national security risk, and the stock dropped 10%. The core problem is that Webull controls $25B of customer assets and allegedly routes retail data through a mainland development team. The CEO has sold 200k shares since late August, and other insiders have also been selling. x.com  x.com 

China's crackdown on illegal cross-border brokers such as Tiger, Futu and Longbridge is milder for Hong Kong stocks than it looks, and likely positive longer term. Existing accounts can only sell for two years, so selling is gradual rather than a stampede, and legal channels like Stock Connect, QDII and Wealth Connect are untouched. Once old positions clear, that money should return via compliant southbound flows, adding liquidity. The hit falls mainly on the brokers' own shares. x.com 

Futu shows the regulatory risk of investing in China, which is why Sea and Grab, with little China exposure, are preferable. Futu fell 40% on a Chinese government investigation. Such episodes usually look scarier than they turn out, and Futu has been dealing with Beijing since 2021, so investors should not be surprised; the key is limiting exposure. x.com  x.com 

China-heavy emerging-market funds carry a lasting governance risk: autocratic leadership has little alignment with foreign shareholders. Chinese shares may offer tactical trades, but a permanent rerating is hard until the CCP is gone. x.com  x.com  x.com 

Chinese stocks are uninvestable for long-term investors because the value created goes to the Communist Party, not shareholders. The Chinese index is down 16% since 1991 while the S&P 500 rose 1,570% and the Nasdaq 3,440%, and Alibaba has gained just 27.8% in 12 years since its IPO. When companies grow too strong, the party hits them with megafines, sidelines founders like Jack Ma or blocks game releases as at Tencent, and foreign investors own only VIE contracts, not shares. x.com  x.com  x.com  … Show more

Chinese internet stocks remain a poor investment because the government treats successful companies as Communist Party vehicles when convenient. The KWEB fund is flat after 13 years while inflation rose 43%, and nearly every company hyped as the next Google disappointed; Beijing forced Jack Ma out and takes from firms that earn too much. China's population is shrinking fast and per-capita spending power is lagging, so capital is better deployed in the US, then Latin America and Southeast Asia. … Show more

China ADRs such as Alibaba were manipulated lower so buyers could load up cheaply, and the rally that followed was overdue. They can run for months. x.com