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Why Shares of Futu Holdings Are Down Today

By Bram Berkowitz – Aug 16, 2021 at 3:56PM

Key Points

  • Chinese and Hong Kong-based companies whose stocks trade on U.S. exchanges face considerable regulatory risks.

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Shares of the Hong Kong-based digital broker and wealth management platform dropped for no obvious reason.

What happened

Shares of Hong Kong-based digital broker and wealth management platform Futu Holdings (FUTU 3.09%) traded more than 9% lower as of 3:07 p.m. EDT for no obvious reason.

So what

Chinese stocks that list on U.S. exchanges face considerable risk from regulators in China, which can flip the script quickly on what looks to be a strong company in the attractive Hong Kong or Chinese markets.

Take another Chinese fintech company, KE Holdings (BEKE 5.11%), which has seen shares plummet more than 54% over the last month. As the largest real estate platform in China, the company has run into trouble directly related to actions taken by the Chinese government on the country's housing market.

KE management recently issued third-quarter guidance of total net revenue between $2.2 billion and $2.4 billion, representing a decrease of approximately 24.6% to 29.4% from the same quarter of 2020. Analysts have also soured on their price targets for KE Holdings, with some bringing estimates down $50 to $60.

Red squiggly line moving downward.

Image source: Getty Images.

Now what 

The good news for Futu is that as recently as two days ago, analysts had given the company a consensus rating of buy and an average one-year price target of $191, which implies substantial upside considering shares currently trade around $91.

However, as we saw with KE Holdings and many other Chinese stocks, things can change very quickly, so keep that in mind. Futu reports second-quarter earnings on Aug. 31, which could prove to be a big catalyst for the stock.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Futu Holdings Ltd Stock Quote
Futu Holdings Ltd
FUTU
$54.34 (3.09%) $1.63
KE Holdings Inc. Stock Quote
KE Holdings Inc.
BEKE
$15.02 (5.11%) $0.73

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