Markets
markets
Claire Yubin Oh

Chinese stocks drop as Beijing regulators launch crackdown on illegal cross-border securities activity

Beijing’s top securities watchdog launched a crackdown against illegal cross-border trading and announced that it will penalize several popular online brokerages on Friday, bringing many Chinese ADRs lower in premarket trading, as the affected brokers’ clients will now only be allowed to sell shares, not buy.

Eight governmental agencies, including the China Securities Regulatory Commission, issued a joint statement on their comprehensive two-year plan to combat illegal cross-border trading after mainland markets closed on Friday, per Bloomberg.

The securities regulator separately followed with plans to impose penalties on online brokerages Tiger Brokers, Futu Holdings, and Longbridge Securities for operating in domestic markets without a license, with plans to confiscate all “illegal gains” from these firms. Hong Kong’s markets regulator also said that it had ordered all licensed corporations to address money laundering risks and ensure additional measures for Mainland Chinese investors.

US-listed shares of Futu and Up Fintech, which owns Tiger, sank as much as 40% on the news. Shares of other Chinese ADRs, including Big Tech names Baidu, Alibaba, and Temu owner PDD Holdings, also dipped following the announcement.

In the joint statement, the agencies encouraged investors to use legal channels such as Stock Connect, Wealth Management Connect, and QDII programs — many of which allow only Hong Kong-listed products or are subject to a quota, per the Financial Times. Interactive Brokers, which allows foreign investors to trade Chinese equities, ticked up modestly in early trading on Friday.

Chinese companies, keen to expand their investor base, have increasingly been adding listings in New York, London, and Hong Kong.

In the joint statement, the agencies encouraged investors to use legal channels such as Stock Connect, Wealth Management Connect, and QDII programs — many of which allow only Hong Kong-listed products or are subject to a quota, per the Financial Times. Interactive Brokers, which allows foreign investors to trade Chinese equities, ticked up modestly in early trading on Friday.

Chinese companies, keen to expand their investor base, have increasingly been adding listings in New York, London, and Hong Kong.

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Powering the positive earnings report was the company’s AI-related revenue, which grew 84% in the fourth quarter and now makes up over a third of total revenue. Investors seem to think the increased demand for servers could have trickle-down effects for other companies.

“The company’s results and commentary reinforced the outlook for strong AI-infrastructure demand while indicating resilient broader traditional server and storage spending,” wrote Woo Jin Ho, a senior technology analyst at Bloomberg Intelligence. “Lenovo’s $21 billion AI-server pipeline and remarks that demand is outpacing supply support Dell’s AI-demand momentum and point to robust orders.”

AI’s insatiable computing demand is reshaping the hardware industry and driving up server demand.

Dell will report first-quarter earnings on Thursday, May 28.

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Ross Stores surges as Q1 results beat expectations, full-year guidance raised

Ross shares are rising after the company delivered strong Q1 results, with sales topping Wall Street’s projections.

The stock soared 6.3% just after the open.

Key numbers:

  • Earnings per share of $2.02 vs. $1.47 year over year (estimate: $1.72).

  • Sales of $6.01 billion, up 21% year over year (estimate: $5.61 billion).

  • Comparable sales growth of 17% (estimate: 8.58%).

CEO Jim Conroy attributed the results to better traffic in stores. “Customer traffic was the primary driver of the strong sales trend as compelling merchandise assortments, higher customer acquisition and engagement from our ongoing marketing initiatives, and an improved in‑store experience are resonating with shoppers.”

The company also noted that transaction volume grew across all key demographics, including “income levels, ethnicities, and age groups, including younger customers.” Sales were also likely buoyed by standard seasonal tailwinds, including consumer spending from tax refunds.

Backed by the strong quarter, the company lifted its full-year targets. Ross now projects same-store sales growth of 6% to 7%, up from the prior forecast of 3% to 4%, topping Wall Street’s estimate of 4.64%. It boosted its annual EPS guidance to a range of $7.50 to $7.74, versus the prior outlook of $7.02 to $7.36.

Ross Stores has been one of the retail sector’s standout performers this year, rising around 20% year to date as of Thursday’s close.

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