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spk00: Hello ladies and gentlemen, welcome to Futu Holdings third quarter 2022 conference call. At this time all participants are in a listen only mode. After management's prepared remarks there will be a Q&A session. Today's conference call is being recorded. If you have any objections you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Daniel Yuan, Chief of Staff and Head of IR at Futu. Please go ahead sir.
spk01: Thanks, operator, and thank you for joining us today to discuss our third quarter 2022 earnings results. Joining me on the call today are Mr. Leif Lee, Chairman and Chief Executive Officer, Arthur Chen, Chief Financial Officer, and Robin Xu, Senior Vice President. As a reminder, today's call may include four looking statements, which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control. forward-looking statements involving hearing rest and uncertainty. We caution you that a number of important factors could cause actual results to differ materially from those containing any forward-looking statements. For more information about the potential rest and uncertainty, please refer to the company's filings with the SEC, including its registration statement. So with that, I will now turn the call over to Leif. Leif will make his comments in Chinese, and I will translate.
spk06: Thank you for participating in today's conference. By the end of this quarter, our number of real estate customers has reached 1.44 million, which is 24% higher than before. In the third quarter, due to the impact of the fall in the market, the number of real estate customers in the competition is about 58,000, which is 5% higher than before. Even though the market is falling, for the first time in the five countries and regions of industry, we have achieved a rate of 98% higher in the number of real estate customers in the quarter.
spk01: Thank you all for joining us today. After the quarter end, we had 1.44 million paying clients, representing a 24% year-over-year growth. In the third quarter, we added 58,000 paying clients, a 5% sequential decline due to stock market tumble. Despite the market downturn, We achieved over 98% quarterly paying client-to-client retention rate for each of the five countries and regions for the first time. Our industry-leading retention metric speaks to the stickiness of our product and the resilience of our premier client base.
spk06: In the Singapore market, the growth rate of competitive real estate customers is more than 30%. This is due to our day-to-day diversification of customer channels. and a series of targeted online and offline marketing activities that we have launched around the public fund. We have also attracted many clients with asset-based orientation. They are more inclined to choose low-risk public fund products in the market. In the U.S. market, as we continue to adjust the online advertising investment strategy and continue to deepen cooperation with local KOL, customer growth remains strong. In the Hong Kong market, Because the overall market performance is too weak, at the same time, we have not had a great attraction to customers for the promotion of silver debt. The delivery speed of Hong Kong in the third quarter has slowed down. Currently, we have about 10% of the population of Hong Kong residents aged 35 to 55. There is still a huge room for improvement. Therefore, in the future, we will continue to put the center of the goods in this part of the population.
spk01: In Singapore, new paying client growth accelerated by over one-third sequentially as we successfully launched targeted online and offline marketing campaigns around mutual funds and expanded client acquisition channels. We were able to attract many allocation-driven clients who gravitated towards lower-risk mutual funds amid market volatility. In the U.S. market, client growth remained robust as we iterated on online marketing and deepened our collaboration with KOLs. The deceleration of client acquisition in Hong Kong was mainly due to sluggish equity market performance, and to a lesser extent, limited traction of our promotions around Silverbond. Residents between the age of 35 and 55 will remain our priority in Hong Kong as our current penetration is around 10%, offering significant room for further growth.
spk06: Our final customer asset is about HK$3,700 billion. Total client assets declined 13% year over year, and 15% quarter over quarter,
spk01: to HK$370 billion. While the challenging equity market weighed on client portfolio valuations, net asset inflow remained strong. In Singapore, total client assets grew by 11% quarter-over-quarter due to higher quality new clients and strong asset inflows.
spk06: According to the record, the total trading volume of HK$1.1 trillion fell by 19%, with the U.S. stock trading volume reaching 69%. The decline in the share price of technology stocks has led to a 16% decline in the share price of U.S. stocks. However, customers still have a high interest in trading ETFs. This minimizes the impact of the decline in the share price of technology stocks. Due to the continuous decline in the share price of Hong Kong stocks, the share price of Hong Kong stocks is 3,040 billion Hong Kong dollars, with a 28% decline in the share price. This quarter, some of the clients went to the market to copy some of China's new economic companies.
spk01: Total trading volume declined 19% sequentially to HK$1.1 trillion, of which U.S. stock trading constituted 69%. Lower turnover of technology names led to a 16% sequential decline in U.S. stock trading volume, partially offset by strong trading interests and leverage of inverse ETFs. Hong Kong stock trading volume was HK$304 billion, down 28% sequentially amid deteriorating market sentiments across all sectors. Margin financing and securities lending balance increased by 2% sequentially, driven by clients' bottom fishing of Chinese new economy names.
spk06: Baifu manages its total assets of 26 billion Hong Kong dollars, which is 47% higher than before and 19% lower than before. We, as a exclusive distributor, launched the first T-0 dollar currency fund product in Singapore. In addition, we also launched the currency fund automatic deepening function in Singapore. After the customer unlocks the function, the system will automatically purchase and redeem currency funds based on the limited funds in the customer's trading account. We are sure that the current increase and decrease cycle is deliberately enriched currency market products, and improved product functions. Promote Singapore's wealth management assets to achieve four times the growth. In Hong Kong, we have newly launched a cash management product with a lock-in period of one month. The product faces professional investors and is expected to have a annual yield of up to 4.2%, and is pulled by the product. The capital amount of the Smoot Foundation is 67% higher than the growth. As we continue to enrich and perfect the product category of the fund and upgrade the product function, by the end of this quarter, the asset customer penetration rate of wealth management products has increased from 15% at the end of the second quarter to 17%.
spk01: Flying assets and wealth management grew 47% year-over-year and 19% quarter-over-quarter to HK$26 billion. In Singapore, We became the exclusive distributor of a newly launched USD-denominated money market fund with T plus zero settlement, the first of its kind in Singapore. We also introduced SmartSafe in Singapore, which gives our clients the option to automatically subscribe for and redeem money market funds based on the cash positions in their trading accounts. We were intentional about adding money market products and enhancing their functionality amid a rate hike environment. thereby growing our wealth management assets in Singapore by fivefold quarter over quarter. Client assets and private funds increased by 67% sequentially, mainly attributable to a new cash management product that offers 4.2% expected annualized return for professional investors with a one-month lockup. As of quarter end, wealth management penetration among paying clients increased from 15% in the second quarter to 17%, as we continue to expand fund offerings and upgrade product features.
spk06: As of the end of the third quarter, we have 301 IPO sales and investor-related customers, as well as 572 ESOP customers, respectively growing by 40% and 76%. This quarter, more than 50 companies have started using our ESOP services, including Ganfeng Li and Weichang Neuroscience. According to the data statistics, Our enterprise business has 301 IPO and IR clients, as well as 572 ESOP clients as of quarter end, up 40% and 76% year-over-year respectively. Over 50 companies adopted our ESOP services during the quarter, including Gansung Levian and Microport.
spk01: In the first three quarters of this year, we underwrote 23 Hong Kong IPOs and ranked second among all brokers, according to WIND.
spk06: Next, I'd like to invite our CFO Arthur to discuss our financial performance.
spk08: Thanks, Liv and Daniel. Please allow me to walk you through our financial performance in the third quarter.
spk10: All the numbers are in Hong Kong dollars and left otherwise noted. Our total revenue was $1.9 billion, up 12% from $1.7 billion in the third quarter of 2021. Brokerage commission and handling charge income was $958 million, an increase of 3% year-over-year and a decrease of 7% Q over Q. The year-over-year increase was mainly driven by a higher blended commission rate of 8.8 basis points up from 6.9 basis points in the year-over-year order. The QOQ decrease was due to close to 20% sequential decline in trading volume, partially offset by the higher blended commission rate. Interest income was $881 million, an increase of 39% year-over-year and 42% Q-over-Q. The year-over-year increase was mainly due to higher income from cash deposits, which more than offset lower margin financing income and IPO financing interest income. The Q-over-Q increase was mostly attributable to higher interest income from cash deposits and higher margin financing income. Other income was $107 million, down 36% year-over-year and up 16% P-over-Q. The year-over-year decrease was mainly due to low IPO financing service charge income, enterprise public relationship service charge income, and current exchange service income. The P-over-Q increase was mainly due to some one-off income items. Our total cost was $218 million, a decrease of 18% from $267 million in the third quarter of 2021. Brokerage commission and handling charge expenses were $83 million, down 34% year-over-year and 5% Q-over-Q. The commission expenses didn't move in line with brokerage commission income due to the cost saving from our U.S. self-clearing, migration, and upgrade service package with our U.S. clearinghouse. The Q over Q decrease was mainly due to lower trading volume. Interest expenses were $41 million, down 40% year-over-year, and up 68% Q over Q. The year-over-year decrease was mostly due to lower expenses from margin financing and security lending. The sequential uptick was driven by higher daily average margin financing balance and higher lender funding costs amid rate hikes. Processing and servicing costs were $91 million, up 35% year-over-year and down 3% year-over-year. The year-over-year increase was primarily driven by higher cloud service fee to support our overseas market expansion. As a result, total gross profit was $1.7 billion, an increase of 18% from $1.5 billion in the third quarter of 2021. Growth margin was 89%, expanded from 85% in the third quarter of 2021. Operating expenses were $761 million, down 0.3% year-over-year, up 5% Q over Q. Early expenses were $313 million, up 40% year-over-year, and 7% Q over Q. The increase was mainly due to increasing R&D headcount as we continue to support new product offering, invest in U.S. self-clearing capabilities, and customize product experience for different new markets. Selling and marketing expenses was $235 million, down 42% year-over-year, up 7% year-over-year. The year-over-year decrease was mainly due to slowing paying client growth. Expenses increased the QVQ as client acquisition costs hiked due to weak market sentiments. G&A expenses were $212 million of 55% year-over-year and 1% QVQ. The increase was primarily due to increase in headcount for general and administrative personnel. As a result, our net income increased by 23% year-over-year and 18% Q-by-Q to $755 million. Net income margin expanded to 39% in the third quarter as compared to 36% in the same quarter last year. Our effect tax rate for the quarter increased to 12.2% as the tax credit from our U.S. clearing has been fully utilized. That includes our prepared remarks. We now like to open the calls to questions. Operator, please go ahead.
spk00: Thank you. If you would like to ask a question, you'll need to press star 1 1 on your telephone and wait for your name to be announced. Once again, that's star 1 1 to ask a question over the phone. Please stand by while we compile the Q&A roster.
spk09: Thank you.
spk00: We'll now take our first question. Please stand by. This is from the line of Cindy Wang from China Relaisance. Please go ahead.
spk03: Thank you for the opportunity to ask the first question. I'm Cindy Wang from China Relaisance. I have two questions for you. The first question is about interest income. 那因为我们看到地息收入其实在第三季有一个很强劲的一个增长, 那可不可以大概给我们一个breakdown, 就是地息收入百,这个margin financing income, bank deposit, 还有IPO financing的interest income的一个占比。 那我们看到第四季度其实Fairway High在11月的时候又在增加了70个BIPs, 那可能到12月的时候还会再增加一个50个BIPs, In the fourth quarter, how much interest income can the bond deposit bring to us in the fourth quarter? The second question is about the interest rate. In the third quarter, the interest rate has seen a relatively large growth. Can you tell us more about the contribution of our extension products or the cost per share? My first question is regarding to the interest income in third quarter. Since interest income show very strong growth in third quarter, Could you give us a breakdown by margin financing income, bank deposit, and IPO financing interest income in third quarter? Since that rate hike was another 75 bps in November and possibly to raise another 50 bps in December, how do you see the contribution from bank deposit in fourth order? The second question is regarding to the commission rate. In third quarter, the commission rate was up again to 8.8 bps. Could you give us the reasoning behind it and how sustainable for the rate in fourth quarter? Thank you.
spk10: Thank you, Cindy. This is Arthur. I will take two of your questions. First, about the interest income. I think the contribution from the IPO margin financing is relatively small. So most of our interest income now comes from the client's idle cash and also our margin business, which I think you are right. We are one of the beneficiary from the rate hike cycle, especially in the third quarter, we see the contribution from the client deposits becomes more meaningful. And down the line, I think on a life-for-life basis, it may contribute more interest income in the fourth quarter. But having said that, you can understand that our interest income actually comes from two parameters. One is the interest rate, i.e., the deposit rate we get from the debt. The other is the client's idle cash average balance, which may be related to the market volatilities. For instance, in the third quarter, the market becomes very challenging and we can see the average cash balance among our clients become much higher. They lower down their stock positions. So I'm not sure whether such allocations versus client stocks and the client's cash will remain in the fourth quarter or not. But if I assume such ratio remain the same versus the third quarter, I think we will get more interest income in the fourth quarter. For your second question about the blended commission rate, There comes from several factors. Number one, as Lee mentioned, in the third quarter, our U.S. trading contributions roughly accounts for close to 70%, which has positive impacts on our blended commission rate. It is very difficult to forecast whether such problem will continue or not, given it is more driven by the market conditions. And secondly, you know, the trading volatility in the third quarter, you know, comes from more clients trading derivatives, such as options and the futures, et cetera. In the third quarter, our trading commission, among our trading commission, roughly 30% came from clients' activities in the derivatives. So it will enhance our blended commission rate as well.
spk08: Thank you.
spk09: Thank you.
spk00: Very clear. Thank you. We'll now take our next question. Please stand by. This is from the line of Zoe Zong from Jefferies. Please go ahead.
spk05: The first is that we have already achieved the goal of increasing the number of 200,000 paid users per year in advance. I would like to ask, in the current situation, what is the situation of customers in different markets in the fourth quarter and what is the strategy for next year's customers? My second question is about the Singapore market. We also see that Singapore's new paid users and customer assets have made a good growth. May I ask if we can share how many paid users we have in Singapore and how much of the mutual fund assets we have? How much of the penetration rate do we expect to increase? Thank you. Thank you management for taking my question. This is Zoe from Jefferies. Congratulations on the solid results. And I have two questions. So first we have already achieved our annual target of acquiring 200,000 new paying clients. So wondering based on the current market conditions, could you please provide some color about our user acquisition in Q4 and next year? And my second question is regarding our Singapore business. As we have seen strong growth in the number of new paying clients and the client assets, wondering how many total paying clients do we have in Singapore as of Q3, and what about the average assets per paying client? How do we think about the penetration rate and upside room? Thank you.
spk10: Thank you, Zoe. I will take your first question, and I will leave your second question to my colleagues, Robin, regarding the situation in Singapore. For your first question, you are right. We are already approaching our full year guidance for 200K new paying clients acquired this year. Quarter to day, I think you can understand and everybody can imagine the market condition was quite challenging across the U.S. and also the Asian markets as well. So based on the current quarter to date run rate, we think the new price applied in the fourth quarter may be smaller or slower than the third quarter. But we are very confident we will continue to acquire the price across the different markets. And also, quarter to date, we still report decent net asset inflows across the different markets. It is too early to give you some sense or the guidance for our next year's new paying clients guidance. We will keep you posted in our fourth quarter earning call.
spk08: Thank you. Thank you, Qilin.
spk13: Let me answer the second question. We got a good growth in Q3 in Singapore. I think it is mainly because we have grasped a relatively stable investment mentality of Singaporean customers. We have done a targeted promotion of low-risk financial management products such as monetary funds. Under the entire increase period, the revenue of monetary funds is constantly increasing, which is very attractive to Singaporean customers. This has also effectively triggered an increase in our new customers. In addition, we are also continuing to improve the growth of our entire opening and so that our overall conversion rate is also improved. At the same time, we see that customer quality is also gradually increasing. The first month of the new customer of Q3 has exceeded 9,000 new coins. This January, we observed that the customer of Huoke usually takes about three months to reach such an entry level. By the end of Q3, Singapore's military assets exceeded 10,000 new coins. In Singapore, we have over 200,000 paying clients now, which we think is about 15% of market share.
spk01: And we think there's a lot of room for further growth. And in the third quarter, we recorded decent growth. It's mainly because we introduced a lower risk wealth management product, such as money market funds, to capture the conservative investment appetite of Singapore clients. And in the rate hike environment, the yields of the money market funds kept rising and become rather attractive to Singapore clients, and thus driving the growth of local new paying clients. And we also continue to optimize the account opening and asset deposit process, thereby driving conversion from users to clients and also to paying clients. And meanwhile, we also saw improving client quality. So for the clients that we acquired in the third quarter, The average net asset inflow in the first month exceeded 9,000 Singapore dollars. While the average net asset inflow of clients acquired in January this year will take about three months to reach this level. And as of the end of the 3Q, the average assets of our Singapore clients was over 10,000 Singapore dollars, recording a modest Q1Q growth. And the increase in net asset inflow was able to more than offset the negative impact of the weak equity market. Thank you.
spk05: Thank you. That's very helpful.
spk00: Thank you. We'll now take our next question. Please stand by. This is from the line of Yu Fan from CICC. Please go ahead.
spk04: Okay, thank you very much for giving me the opportunity to ask this question. I am Yoyo, the analyst of Zhongjing Company. First of all, congratulations to the company for achieving a very attractive performance in such a fluctuating market environment in the third quarter. I have two main questions here. First of all, the first one is about the specific breakdown of our users, including our new users, as well as the distribution of the area according to the number of users. Okay, I will translate my clustering. Thanks management for taking my clustering. This is Yoyo Fan from CICC. First, congratulations on the exciting results achieved this culture is by the volunteer market environment. I have two questions here. The first one is about the client region breakdown. Would you please introduce more on the region breakdown of the newly added and also the existing paying clients? And also by second quadrant, it's about the client asset breakdown. We see that the total client asset decreased by 15% quarter over quarter. Would you please give us the breakdown of the asset flow and the market-to-market loss?
spk10: Thank you.
spk08: My colleague Robin will answer two of your questions. Thank you.
spk13: Thank you for the question. Among our Q3 competitive real estate clients, we can see that the US and Asia regions are almost half of each other. The largest increase in the Asia region is Singapore, followed by Hong Kong. In addition, let's look back at the Q3 last year's data. Now, there are 30% overseas with assets and customers. Of course, this does not include Hong Kong. If you calculate the whole group, the most is currently Hong Kong, which is nearly 40%. Now, Singapore and the United States have less than 20%. It's probably such a situation. Another question is about assets. One of the and market fluctuations. My point of view is that market fluctuations and customers' entry fees are actually the main factors that affect the size of our customers' assets. Q3, looking at the entry fees of customers in various markets, the situation is relatively good. The total entry fees and Q2 are even, but under the continuous decline of the U.S. stock and Hong Kong stock markets, the total assets of customers are still reduced. In other words, the market First of all, to your question on the breakdown of our paying clients.
spk01: So among the new additions in the third quarter, Asia contributed about half of that, among which Singapore was the main contributor, followed by Hong Kong, and the U.S. contributed roughly the other half. And as of the end of the third quarter, the overseas paying clients was around 30%, in which Singapore outnumbered the U.S. by a small margin. And then in total, Hong Kong contributed close to 40%. And overall, Singapore and US each contributed less than 20% of our overall paying client base. And to your question on client assets, so market fluctuations in clients' net asset inflow were the most important factors affecting our total client assets. And in third quarter, the net asset inflow in clients in all markets were quite robust, and the total amount remained flat compared with the second quarter. However, the declining Hong Kong and U.S. stock markets drag down the total client assets. Thank you.
spk04: Thanks for the answer.
spk00: Thank you. We'll now take the next question. Please stand by. And this is from Leon Key from Daiwa. Please go ahead.
spk11: Hello, I am Li Yangqi from Da He Securities. Thank you very much for giving me the opportunity to ask this question. I have two questions to ask. The first one is about Singapore. The second one is about Hong Kong. In Singapore, I just heard that the management has already talked about our new customers growing very strongly in the third quarter. I would like to pay attention to our product toolbox. Because the management also talked about our third quarter, such as currency-based funds, big financials, and such products actually attracted a lot of customers in Singapore with relatively low risk. Then what kind of products are there in our product toolbox that can make our entire product ecosystem richer? Then we are going to go deeper into the existing products to give customers a better experience. Or there are some new asset classes or subclasses, even crypto. Will we consider this? This is about our product ecosystem in Singapore. The second question is about Hong Kong. In fact, Hong Kong's AUM upside is relatively large. I understand that. In fact, what I want to ask is about our customer growth. Does the management think that our future potential in Hong Kong is mainly AUM growth, and customer growth has relatively reached a relatively harmonious level? I don't know how the management sees these issues. Are we going to dig deeper into customers in Hong Kong in the future, or are we going to add new customers? These are the two questions. Then I will translate them. This is Leon Chee from Daiwa Securities. Thanks a lot for management for taking my questions. I have two questions today, one on Singapore and the other on Hong Kong. Singapore, I just want to note that what management is thinking about in terms of your future product pipeline, understand you have been launching money market funds and wealth management products in order to expand your product ecosystem, especially now equity-related ones. What else are in our product ecosystem toolbox? Are we considering any new asset classes or subclasses, for example, crypto? I'm wondering how many of us think about these new asset classes. Second question is on Hong Kong. Well, I understand there is still substantial upside in terms of per customer AUM in Hong Kong, but... Appreciate if management can give any color on your user upside in Hong Kong. Do you think Hong Kong is already quite penetrating in terms of our current position? How do you see our future growth from Hong Kong? Is it more from new users or from per user AUM? Thanks a lot.
spk10: Thanks a lot, Leo. My colleagues Robin will answer your first question about Singapore.
spk08: And our founder, Mr. Li Li, will answer your second question about Hong Kong. Thank you. Thank you for the question.
spk13: We are in Singapore. Actually, since we entered the Singapore market last year, we have been continuously building our entire product and the trade we provide. We are continuously building our competitiveness. Next, we will focus on several aspects. I think it's One is that we do not yet support equity trading in Hong Kong stocks. In the near future, we will ask Singapore customers to provide equity trading in Hong Kong stocks. Of course, it also includes the joint equity of US stocks and the trading of foreign exchange and bonds in Hong Kong stocks. These are our next key tasks. In addition, we have already obtained the capital of the Singapore Stock Exchange, so in the future, we will continue Thank you, Steven.
spk01: Right. So since last year, we have continued to enhance our product functionality in Singapore. And going forward, we have a couple of new products that we want to roll out to the retail clients, including the Hong Kong options trading and select US options trading as well. And we also plan to launch leverage forex trading in Singapore and also bond trading. And we've also acquired a self-clearing license in Singapore. So going forward, we'll build our self-clearing capability and allow our clients to transfer their assets to CDP accounts. And last but not least, I think we're also investing into our enterprise services, mostly geared towards a lot of family offices in Singapore. Thank you.
spk06: Let me answer the second question. As of now, according to our latest data, The penetration rate of Hong Kong retail investors is about 20%. Among the 35 to 55-year-old Hong Kong middle-aged people, there are currently about 10% of them are real estate customers. So in the future, we will continue to penetrate the customer groups in this part where the penetration rate is relatively low. So in the long term, we will also pay more attention to So lately, FUTU's penetration rate of our Hong Kong retail investors is around 20%.
spk01: and we think nearly 10% of the middle-aged, aka 35 to 55-year-old Hong Kong residents. So our penetration among that population is around 10%. And I will continue to focus on further penetrating these client cohorts. In the long run, we'll also pay more attention to asset-related matrices, such as clients net asset inflows. And we intend to continue to increase the wallet share of our clients through expansion of our product offerings and also increase in client engagement. Thank you.
spk11: Very helpful. Thanks a lot.
spk00: Thank you. We'll now take our next question. Please stand by. This is from the line of Frank Tseng from Credit Suisse. Please go ahead.
spk07: Thank you for giving me a chance to ask questions. I have two questions. The first one is about entering the new market. Can you tell us how the process of entering the new market is going? Do we have any specific plans for 2023? The second question is about the cost of goods and services. We noticed that the cost of goods and services in the third quarter is about HKD4,000. In the future, how should we look at the trend in the fourth quarter, including next year? In addition, the previous company also mentioned a metric, that is, net asset inflow as a share. So the cost of this should be around 1 to 1.5 percent points. At present, let's see if this number is more consistent. Let me translate it. First question is on new market entries. What is our current progress in terms of exploring new markets and any tangible plans in 2023? Second question is on client acquisition expense. We note that in the third quarter, CAC is around $4,000 Hong Kong dollar. How shall we think about CAC going forward? Also, company mentioned 1% to 1.5% expense ratio based on net asset inflow. Are we on track in terms of this metric? Thank you.
spk10: Thank you, Frank. I will take your second question first. And our founder, Mr. Lee, will answer your first question about new market expansion. For the CAC, I can understand everybody may be slightly disappointed about, you know, our third quarter results. I think there are some, you know, reasons behind that. Number one is definitely the market conditions in the third quarter is quite very challenging. Singapore Day, we actually continue to make some brand equity efforts in Hong Kong and in Singapore, despite some of our peers start to set back their marketing campaigns. As we do think, you know, brand equity building up is a very long-term process, and we need some patience in the market volatility conditions. And certainly, as Liv mentioned in opening remarks, we try to do some new initiatives, such as civil bond promotions in Hong Kong, which unfortunately didn't pay out very well, which increased our CAC in the third quarter. Down the road, I think the fourth quarter may continue very challenging, given the order today market conditions. So, you know, our CAC levels in the fourth quarter, it may continue to be on a relatively high level. For the asset acquisition course, I think you're right. We are still well on track in the range of 1 to 1.5% yesterday. Thank you very much.
spk08: Okay.
spk06: We expect to continue to enter the new international market in the first half of next year. In fact, we are also actively researching some opportunities for the international market, not excluding some of these product functions, to go online in the new market, to carry out this verification study, to collect some feedback from the local market. In this way, we will continue to optimize and update products to meet the needs of local customers.
spk01: We expect to enter into new overseas markets in the first half of next year, and we're also dynamically exploring the opportunities in some overseas markets. And we also consider launching certain select product features in a new market first for validation purposes and collect the feedback from the market so as to constantly optimize and upgrade a product to meet the needs of the local clients. Thank you.
spk07: Okay. Thank you very much. Many thanks.
spk00: Thank you. We'll now take our next question. Please stand by. This is from the line of Emma Xu from Bank of America. Please go ahead.
spk02: My question is about the U.S. market. Just now, Manager Chen mentioned that the U.S. has contributed about 50% of its new customers in the last three seasons, which is also a very important increase in our market. Can you talk about our future growth plan in this market, as well as the characteristics of our customers in this market, including military assets, as well as the cost of goods and services there, as well as the recovery cycle of customers? So my question is about your U.S. market. As Benjamin just mentioned that U.S. market contributed to around 70% of new client in third quarter. So this will be a very important new market for your company. Could you tell us what's your plan for these markets in the median to longer term? And could you tell us what's your client characteristics in this market? For example, the average client asset, the client acquisition cost for U.S. clients, as well as payback period.
spk08: Okay. Our founder, Liv, will answer this question. Thank you.
spk06: Yes, regarding the U.S. market, we have been making constant adjustments to these different investment channels. In the past three seasons, we have continued to use advertising, advertising, and deep cooperation with KYL to increase the brand's visibility in the U.S. market. Although in the past three seasons, the speed of our goods and services in the U.S. has increased, the negative impact of the downfall of the entire market has still compensated for the growth of some clients' income. the overall household budget has decreased. In addition, in the fourth quarter, the holiday season in the United States has started to change. The whole holiday mood will actually affect a part of the customer's interest in entering the country. So we expect that the goods and customer speed in the U.S. market will slow down in the fourth quarter. At the same time, we are also
spk01: So we continue to iterate on client incentives across various channels in the U.S., and our continued marketing and industrial operations with KLL helped improve our brand awareness in the U.S. market. And despite the acceleration of client acquisition, Average assets per paying client has decreased as market downturn offsets shown as assets implode for our clients. And looking into the fourth quarter and as a result of the upcoming holiday season, we expect the sentiment to affect some U.S. clients' willingness to open accounts and transfer funds, causing client acquisition to slow down in the U.S. In the meantime, we'll continue to focus on improving the client quality and the efficiency of client acquisition. And in terms of client acquisition costs right now, the CAC in the U.S. is lower than the overall gross client acquisition costs. However, the payback period will be much longer. I think we're still patient on our monetization in the U.S. as we plan to roll out a number of new product features in the coming quarters that we think can meaningfully improve monetization. Thank you.
spk09: Thank you.
spk00: We'll now take our next question. Please stand by. This is from the line of Peter Zhang from JPMorgan. Please go ahead.
spk12: My first question is about the Hong Kong market. We saw that the share of Hong Kong stocks decreased by 28% compared to the previous quarter. However, we saw that the share of the Hong Kong market decreased by 18% compared to the previous quarter. So I would like to ask, what is the reason for the decrease in the share of Hong Kong stocks? Okay, let me do the translation. This is Peter Zhang from JPMorgan. Congratulations on the strong results. My first question is about the market share in Hong Kong. We noticed that the food trading volume in Hong Kong declined by 28% quarter-by-quarter, while the total trading volume in Hong Kong market declined by 18%. So we wish to understand what's the reason behind. My second question is on the IT spending. Management gave guidance of 20% headcount increase in 2022. I wish to check what's the progress on this initiative and what will be the IMD expense trend going forward. Thank you.
spk10: Thank you. I will take both of the questions. I think number one, the comparison is our trading volumes, you know, change patterns versus the overall markets. The reason behind it, in my humble view, is that the overall markets, including retail investors and also institution investors, When the market becomes extremely volatile and extremely challenging, normally, you know, institutional investors trade more, you know, tactically and responsibly versus retail investors. given, you know, certain retail investors may continue to hold their positions, unlike institution investors will, you know, become more nimble and react to the market volatility. This is the question number one. For question number two, I think, you know, yesterday we are on track in terms of the net new head account increase, you know, in this year. And particularly, I think, you know, in terms of data, the overall, you know, headcount increase has already peaked in terms of speed versus, you know, the past two years. So down the line, I think, you know, we are few, you know, to the internal evaluations about next year's budget in terms of headcount. But I do think, you know, the increase of the headcount, especially in the R&D side next year will be, you know, quite stable or, you know, the speed may be smaller, even smaller than this year. Thank you.
spk12: Okay.
spk10: That's very clear.
spk12: Thank you.
spk00: Thank you. And this concludes the question and answer session. I would now like to hand back to Daniel for closing remarks.
spk01: That concludes our call today. And on behalf of the FUTU management team, I would like to thank you for joining us tonight. And if you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you and goodbye.
spk00: Thank you. This does conclude the conference for today. Thank you for participating and you may now disconnect.
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