New investments by existing mainland clients are also to be
"strictly monitored" to prevent investors from bypassing China's
foreign exchange controls, said the notice. The news was first reported by
Reuters.
The actions, which will restrict capital outflows, come as
faltering growth for the world's second-largest economy has spurred investment
overseas, weighing on the yuan and prompting authorities to ramp up efforts to
stabilise the currency.
The yuan, one of Asia's worst-performing currencies, has
weakened 5.5% this year as China's post-pandemic recovery quickly lost steam
and the dollar climbed due to interest rate differentials and geopolitical
uncertainty globally.
That has forced authorities to unveil a slew of measures in
recent months to stem its decline.
The China Securities Regulatory Commission (CSRC) has told
brokerages to stop offering securities trading from offshore accounts such as
Hong Kong to new mainland investors, according to a Sept. 28 notice issued by
its Shanghai unit.
Activities now considered illegal include cross-border
securities broking, securities lending, fund sales and investment consulting,
according to the notice.
It was not clear when the new directive was effective, but
the sources said they believed the regulator meant effective immediately.
An end-October deadline has been set for the removal of apps
and websites soliciting mainland clients, the notice also said, adding that
offline channels for opening accounts should also be shut down.
The sources declined to be named as they were not authorised
to speak to the media. The CSRC did not respond to a Reuters request for
comment.
"We believe the main policy purpose is to curb capital
outflows, especially in the context of yuan depreciation pressure," said
Shujin Chen, head of China financial and property research at Jefferies.
"From an industry perspective, the impact will be
greater on brokerage firms with larger offshore retail business."
For brokerages such as state-owned Citic Securities
(600030.SS), , CICC (3908.HK) and Haitong Securities (600837.SS), (0665.HK),
offshore trading services are a key source of revenue for their Hong Kong
units.
The three brokerages did not immediately respond to Reuters
requests for comment.
FROM NARROW GUIDANCE TO BIG BAN
The ban on offshore investments via domestic brokers comes
after two online brokerages - Futu Holdings Ltd and UP Fintech Holding Ltd - in
May announced the removal of apps in China amid Beijing's sharpened focus on
data security and capital outflows.
The CSRC last December said the two brokerages had operated
cross-border securities businesses involving domestic investors without
regulatory consent.
A few months later, Shanghai brokerage Guotai Junan received
similar informal instruction, a source with knowledge of the matter told
Reuters.
Some Hong Kong units of Chinese brokerages had also stopped
opening accounts for mainland clients following informal guidance from the CSRC
aimed at discouraging illegal money outflows, state media reported in February.
The use of offshore brokerage accounts in Hong Kong entails
converting yuan to other currencies.
Chinese individuals are still able to invest offshore either
via the Stock Connect with Hong Kong or by using the quota-based qualified
domestic institutional investor and the qualified domestic limited partnership
programmes.
They can also use some foreign brokerage platforms outside
mainland China if they have funds parked in offshore locations.
A total of 27 listed Chinese securities brokerages had set up
offshore units by the end of 2022 with the largest ones conducting offshore
trading services for mainland investors, according to a research note from
Hwabao Securities. -Reuters
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