SBI, owner of Japan’s largest online brokerage, will leave Hong Kong over concerns about the national security law, becoming one of the first major financial institutions to say so publicly.

“Without freedom, there is no financial business,” SBI’s chief executive Yoshitaka Kitao said in an interview with the Financial Times. Hong Kong was “not a good place for financial institutions” as the national security law — which Beijing imposed on the city last June — had created fear in Japanese boardrooms, Kitao said.

Japanese financial institutions had become “very much afraid” of Hong Kong’s political developments, and an increasing number of them were reconsidering their presence in the city, he said.

Last September, SBI confirmed that it was considering moving its 100-person operation out of Hong Kong.

Kitao said he would rather have an office in Beijing or Shanghai to handle mainland Chinese business directly, without needing to use Hong Kong as a gateway. Japanese manufacturers, retailers and wholesalers would soon follow suit in moving to the mainland, he added.

Kevin Tsui, an associate professor of economics at Clemson University, South Carolina, said Hong Kong’s financial services industry will take further hits if Beijing maintains its iron-fist approach.

Companies with an Asia-Pacific focus might consider relocating their headquarters to Singapore or Malaysia, while China-focused firms might move their offices to the mainland to save costs, Tsui said.

Pro-Beijing lawmaker Christopher Cheung, who represents the financial services industry, downplayed the importance of politics, saying that there had been increasing market competition from mainland Chinese brokerages.

The COVID-19 pandemic as well as the recent increase in stamp duty have also exerted pressure on small and medium-sized brokerages, Cheung said, though he said he believed the industry still had a strong outlook.

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