Why Is Futu Holdings Stock Down Today?

Why Is Futu Holdings Stock Down Today?

Another Chinese fintech company suffers following the latest government crackdowns on personal data privacy. But will this stop investors?

Futu Holdings Ltd. (NASDAQ: FUTU) has seen a stark decline in its stock price since Thursday. Already in a slow decline through the beginning of the week, the stock price has dropped by over 29% over the last 5 days. This steep drop is aligned with the announcement that China’s new personal data privacy laws come into effect on November 1. The law in question aims to further regulate Chinese cyberspace in order to help safeguard national security.

Why does this matter to investors?

Futu Holdings offers the Chinese population an opportunity to invest in external stock markets through its digital brokerage and wealth management system. China’s new “Personal Information Protection Law” will heavily regulate the export of personal data, which means Futu could potentially violate these strict data privacy rules based on its existing practices. Futu doesn’t have a brokerage license within China so new customer data has to be exported to sign up for the service. This practice will put the company and other similar online brokerages on the regulatory radar moving forward.

Is Futu Holdings Ltd. a good investment?

Futu Holdings currently possesses access to the potentially lucrative Chinese finance market. It also posted promising financial reports as part of its Q2 results, with revenue up 129.3% and new users up 66.8% year-over-year respectively. 

However, questions around how much the new data laws will affect the company has led to a lot of uncertainty. Prices have continued to fall on Friday, with the stock now at its lowest price since January. In total, the stock price has dropped almost 30% in the past five sessions. Caution and patience could be key in determining whether or not to invest in Futu. Until there is a clearer picture of how it can operate under new regulations, it might be best to wait.

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