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spk11: Ladies and gentlemen, welcome to Futu Holdings' third quarter 2023 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 to CEO and Head of IR at Fudu. Please go ahead.
spk06: Thanks, Operator. And thank you for joining us today to discuss our third quarter 2023 earnings results. Joining me on the call today are Mr. Leif Leif, Chairman and Chief Executive Officer, Arthur Chen, Chief Financial Officer, and Robin Xu, Senior Vice President. As a reminder, today's call may include forward-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 involve inherent risks and uncertainties. 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 risks and uncertainties, please refer to the company's filings with the SEC. including its annual report on Form 20F. So with that, I will now turn the call over to Leif. Leif will make his comments in Chinese, and I will translate.
spk08: Thank you for attending today's conference. In the third quarter, we have added about 6.5 million self-employed customers, with a growth of 12%. The total number of self-employed customers has reached 1.65 million, with a growth of 14%. In 2023, in the first three quarters, we have obtained more than
spk06: Thank you all for joining today. In the third quarter, we acquired around 65,000 paying clients, a 12% sequential increase. Our total paying clients reached 1.65 million, a 14% year-over-year. Three quarters into 2023, we have exceeded our full-year guidance by acquiring over 163,000 paying clients.
spk08: Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. We have officially opened our first physical store in Hong Kong. In the physical store, our staff help customers open their stores, show customers the high-end features of our products, and answer customers' questions about our products. The physical store has helped us improve our brand awareness in the Hong Kong market, and attract middle-aged and elderly groups with lower cost. In the third quarter, 55-year-old and older customers account for more than half of the physical store's new asset customers.
spk06: In the third quarter, Hong Kong market contributed over 40% of new paying clients. This acceleration in client acquisition was driven by the relief rally in the first half of the quarter and successful marketing around the government's green bond and silver bond issuances in the second half. These two bond offerings attracted allocation-driven clients to our platform. In late July, we opened the first offline store in Hong Kong to raise brand awareness, assist clients with account opening, demonstrate advanced product features, and address inquiries regarding our products and services. Through this offline store, we managed to attract middle-aged and senior clients at a lower customer acquisition cost. In fact, clients aged 55 and above contributed over 50% of paying clients acquired through the offline store in the third quarter.
spk08: In Singapore, we launched a series of sales activities around the cash club. We have achieved a good result. In the past, the number of real estate customers has increased by 35%. In the U.S., with the addition of new real estate customers, the net revenue has increased. Customer quality has been further improved. In September, we officially launched the stock market economy business in Japan and Canada. Currently, we provide trading services for U.S. stocks to Japanese customers. We provide trading services for U.S. stocks and domestic stocks to Canadian customers. At the beginning of the new market industry, In Singapore, we launched successful marketing campaigns to promote our cash management product, Cash Plus, thereby growing our paying clients by 35% year-over-year.
spk06: we continued to observe improvement in client quality in the U.S. as net asset inflow of new paying clients trended higher. In September, we officially launched our brokerage business in Japan and Canada, now offering clients access to U.S. stock trading in Japan and U.S. and Canadian stock trading in Canada. During the early innings of Market Lounge, we will remain focused on refining our account opening go-to process, expanding trading products, and honing our brand positioning and marketing messages. Despite bearish sentiments across global equity markets, we recorded another quarter of over 98% paying client retention rate.
spk08: We continued to expand our trading products in this market. In Singapore, we launched a market share function, which lowered the investment threshold for new investors. We continue to enrich trading product offerings across markets.
spk06: In Singapore, we launched fractional shares for U.S. stocks and ETFs to enhance accessibility for novice investors. We optimized our product for active options traders by introducing multi-leg options rollover strategy in Hong Kong and the U.S. This trading function gives options traders flexibility to roll contracts near expiration to a later date at different strike prices.
spk08: Although the market retake has had a negative impact on the market value of the customer, the customer's total asset return is still stable. It is worth mentioning that as the quality of new customers is constantly increasing, the total assets of Singapore customers have achieved a double return growth in the fifth consecutive quarter. Compared with the asset customers acquired in the previous quarter, in this quarter, Singapore's new asset customers' net asset surplus has increased by 20%.
spk06: Total client assets increased by 27% year-over-year to HK$468 billion. While the market pullback dragged the valuation of our clients' stock holdings, total client assets remained stable quarter-over-quarter due to robust net asset inflow. Notably, total client assets in Singapore achieved double-digit sequential growth for the fifth consecutive quarter, which was partially driven by higher new asset quality. The average asset balance of new paying clients in Singapore was 20% higher than the prior quarter.
spk08: The average asset balance of new paying clients in Singapore was 20% higher than the prior quarter. Trading volume in the third quarter rebounded as clients traded more actively amidst heightened volatility. Total trading volume increased by 14% sequentially to HK$1.1 trillion.
spk06: of which U.S. stock trading constituted around 75%. Higher trading turnover of the magnificent seven stocks led U.S. stock trading volume to grow by 19% quarter over quarter. Hong Kong stock trading volume increased by 5% sequentially, mainly driven by rising trading interests and leverage in inverse ETFs. Margin financing and securities lending balance slipped 4% quarter over quarter as some clients unwound their bets against popular U.S. technology names.
spk08: Taifu manages a total of 520 billion customers, which is 100% higher than before, and 19% higher than before. In the third quarter, the U.S. national revenue has maintained a high position, leading to a total of 87% increase in customer debt assets. In Hong Kong, with the increase in uncertainty in the red-collar environment, the risk of high-quality customers has decreased, and the structure has become more and more welcoming. With the rise of this type of product, the net profit per share has increased by 52%. In Singapore, the number of business owners in the wealth management industry has increased by 3 times. The share price has also been increased by 3 times compared to the same period last year. The growth of the wealth management customer's total assets has increased by 5 times. In the third quarter, we have further enriched the product category of the Singapore market, and launched the structural jump and the expansion of Singapore.
spk06: total client assets and wealth management grew to 52 billion Hong Kong dollars as of quarter end, up 100% year-over-year and 19% quarter-over-quarter. In the third quarter, client assets and bonds increased by 87% sequentially as U.S. Treasury bills maintained high yields. In Hong Kong, structure notes were met with high demands from high net worth clients as their risk appetite abated amid macro uncertainties. As a result, private fund balance grew by 52% quarter-over-quarter. In Singapore, total client assets and wealth management increased by five-fold year-over-year, driven by tripling of wealth management clients and higher average asset balance. In the third quarter, we further expanded our product portfolio in Singapore by introducing structure notes and FGS bonds.
spk08: At the end of the third quarter, we have 391 ICOs and investors. and increased by 30% in the same year. In the third quarter, we, as a joint account management, participated in many large-scale Hong Kong IPO, including the first-time sponsor of Hukou Yacht, and TIP. At the same time, we participated in all the IPO in Hong Kong, which is worth more than HK$110 million in the third quarter. According to the data statistics, in the previous three quarters, we, as a marketing company, participated in 26 Hong Kong IPO projects and won first place in all online events.
spk06: We have 391 IPO distribution in IR clients at the quarter end, of 30% year-over-year. In the third quarter, we acted as joint book runners of several high-profile Hong Kong IPOs, including those of Tohoku Car, 4Paradigm, and Keap. We also participated in the Hong Kong IPOs of all companies with market capitalization over HK$10 billion by the end of quarter. In the first three quarters, we underwrote 26 Hong Kong IPOs,
spk08: and ranked first among all Hong Kong brokers, according to WIND.
spk06: Next, I'd like to invite our CFO Arthur to discuss our financial performance.
spk10: Thank you, Dave and Daniel. Now, please allow me to walk you through our financial performance in the third quarter. All the numbers are in Hong Kong dollars unless otherwise noted. Total revenue was $2.7 billion, up 36% from $1.9 billion in the third quarter of 2022. Brokerage commission and the handling charge income was $1 billion, an increase of 5% year-over-year and a 6% Q-over-Q. Higher contributions from derivative trading lift the blended commission rate from a 0.8 basis point in the third quarter last year to a 9.3 basis point this quarter. Interest income was $1.5 billion, an increase of 71% year-over-year and a 7% Q-over-Q. The sequential increase was mainly driven by a higher interest rate on client cash deposits partially offset by lower cash balance. Other income was $137 million, up 28% year-over-year and the 8% QQQ. The increase was largely due to higher fund distribution income. Our total costs were $437 million, an increase of 101% from $218 million in the third quarter of 2022. Brokerage commission and the handling charge expenses were $63 million, down 24% year-over-year and 14% Q-over-Q. The expenses didn't move in tender with brokerage commission and the handling charge income, mainly due to cost savings from our U.S. self-clearing business. Interest expenses were $289 million, up 546% year-over-year and 31% Q-over-Q. The year-over-year and the Q-over-Q increase were both driven by higher interest expenses associated with our security lending business. Processing and servicing costs were $86 million down 6% year-over-year and 13% Q-over-Q. The year-over-year decrease was mainly due to saving from crowd service fee as a result of system optimization, and the Q-over-Q decrease was mainly due to lower system usage fee. As a result, total gross profit was $2.2 billion, an increase of 28% from $1.7 billion in the third quarter of 2022. Growth margin was 84% as compared with 89% in the third quarter of 2022. Operating expenses was up 17% year-over-year and a 5% Q over Q to $893 million. IMD expenses was $360 million, a 15% year-over-year, and a down marginally by 1% Q over Q. The year-over-year increase was mainly due to higher R&D headcount as we continued to upgrade our infrastructure, roll out new products and features, and customize products for international markets. Selling and marketing expenses were $212 million, down 10% year-over-year, and up 21% Q-over-Q. The expenses declined year-over-year due to lower customer acquisition costs, and the Q-over-Q increase was primarily driven by accelerated paying client growth. General and administrative expenses were $322 million, up 52% year-over-year and 3% Q-over-Q. The rise was primarily due to an increase in headcount for general and administrative personnel to support our international market. As a result, our net income increased by 45% year-over-year and it declined by 3% Q-over-Q to $1.1 billion. Net income margin expands to 41% from 39% in the same quarter last year, mainly due to strong revenue growth and the lower selling and marketing expenses. That concludes our prepared remarks. We now like to open the call to questions. Operator, please go ahead.
spk11: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up your handset to ask your question. The first question comes from the line of Leon Chi with Daiwa. Please go ahead.
spk09: Hi, thanks for taking my question. 感谢管理层给我这个提问的机会。 我是Daiwa的Leon。 想请教管理层两个问题。 第一是我们这个新市场。 Just now, the management team also talked about the two new markets in our industry, Japan and Canada. Especially in Japan, although the time is relatively short, I don't know if our management team has observed any early indicators. For example, in terms of our customer behavior, their trading frequency, their take margin ratio, and their specific products for trading. I don't know if these customer behaviors are different from those of our customers in other markets. In addition, is there any difference in the cost of goods? Unique Economics, please introduce it to us. The other is about our financial management. Of course, we also see that the growth of AUM is very rapid. As I just mentioned, the stock market may be a major factor in the growth. Of course, in the current US dollar interest environment, we can understand that the increase in the stock market is relatively high. 那如果展望的稍微长一点, 就是我们这个cross整个interest rate cycle里面, 可能管理层觉得是哪一样类型的产品, 除了货机之外, 非货机产品能够占到多大比例吧, 以及想了解一下我们现在货机的take rate, 大概是怎么样的水平。 好,那我用英文翻译一下, Thanks management for taking my questions. This is Leon from Daiwa. My first question is regarding our new markets. especially in Japan. We understand we just launched Japan in late September. I'm interested in the user behavior in terms of our Japan new clients. Does management see any early indicators in terms of the trading velocities, margin landing penetration, and the specific trading products that our Japanese clients are being engaged in? Is there any significant differences in terms of these metrics for customers in Japan versus other markets. And also, I'm interested to know the customer acquisition cost for us in Japan. So appreciate any color on the unit economics in Japan. And my second question is on wealth management. We do appreciate the very rapid growth of our AUM in wealth management. And per management introduction just now, money market fund is a major reason behind that. I'm sure this is partly because of the high U.S. interest rates, but if we look at it from a cross-interest rate cycle perspective, how much proportion does management expect the non-money market fund products to contribute in our overall wealth management AUM? And also, what is our take rate on money market fund now?
spk02: Thank you very much.
spk03: Thank you, Leo.
spk10: Let my colleague Daniel answer the first question first, and I will answer the second question. Thank you.
spk06: Sure. So unfortunately, we now only offer U.S. cash equities trading to our Japanese clients. So we don't have margin. We don't have Japanese stock trading. So we only have data for client behavior on U.S. stock trading. And so far, the turnover of U.S. stock trading is not so different from what we've seen in other markets. That being said, we have a very aggressive and ambitious product roadmap for next year, and some of the products that I mentioned that we don't support now will be rolled out in the next couple of quarters. In terms of client acquisition cost, because we are coming from a small base of clients, whereas we have a lot of fixed costs for setting up markets, setting up offices in Japan, and hiring marketing personnel. Obviously, our CAC for this quarter and next quarter in Japan will be higher than our group average. But over time, as we increase the number of clients in Japan, the CAC will gradually come down. And so far, we have no reason to believe that the CAC in Japan will be higher than what we've seen in other markets. And just to give you some other colors and updates on our Japan business, we now have slightly over 400,000 users on our platform, and overall users have been very active, and we observed that on average during the trading days, our DAU to user ratio was close to 20%, which is the highest among all the markets we are currently in. And user growth, along with paying client growth, will be our key priorities for next year. Thank you.
spk10: Okay, for second question regarding the wealth manager, I think the key for us to do this kind of business is to engage a client and focus on the long-term values of the clients. Therefore, we do not put too emphasis on the near-term monetizations. But having said that, the take rate for these money market funds is essentially just similar to our other products, such as equity products or fixed income products. I think we have already established a very comprehensive matrix in terms of the product offerings in our Daxiangcaipu. For instance, besides the money market fund, we also have the equity products, fixed income products. In particular, as Liv mentioned in the opening remarks, we have launched free floating rate, no, FCN products in the past two quarters and record a very strong growth. We think these products will further diversify our clients' asset allocations and help them to navigate different interest cycles down the line.
spk02: Thank you very much for your comment, Arthur and Daniel.
spk11: Thank you. Next question comes from the line of Chiao Huang with MS. Please go ahead.
spk01: Thank you, Mr. Guan. I have two questions for Mr. Guan. First of all, as Mr. Guan mentioned, there is a decrease in the return of idle cash. What is the main reason for this? Do we see that some of the customers have saved up some money, and they gradually put some of the cash out of the cash and other products? In addition, I would like to ask about the proportion of our new customers' income in the stock market and the fund. What is the proportion? This is the first question. The first question is on idle cash, and we saw some sequential decline in idle cash, so just wondering what's the reason for that, and if we are seeing some of the existing clients are shifting their cash to mutual funds or other products. And also a related question is for the new inflow of client AUM, what's roughly the proportion between stocks and clients? other investment products such as mutual funds. And second question is, can management talk about the strategy in Japan, as we are seeing some local brokers are offering zero commission already? So what's our competitive strategy there? And what's the thinking about the future monetization? Would we be considering, you know, building more comprehensive financial offerings and the capabilities in Japan in order to improve the monetization over time? Thank you.
spk10: Okay, I will answer the first question, and then the second question will be answered by my colleague Daniel. The reason for the drop in the share price of our fund this quarter is mainly because customers have bought a lot of stocks in this quarter, especially U.S. stocks at the end of this quarter. The small amount of funds are also reduced because of the purchase of funds. As you just asked, the configuration of the assets that our new customers come in is about 70% in the stock market. In terms of your first question, the idle cash decrease was primarily due to our clients shift their cash positions to more equity stocks, especially on the US stock assets at the border end. Also, the partial reason is because, you know, some clients allocate more on the wealth management products during the quarter end as well. In terms of the new clients' inflows, the allocations among cash, stock, and also the wealth management, roughly, you know, stock positions account for 70%, and the wealth management products account for 10%, and the remaining belongs to the idle cash. Thank you.
spk06: And Shiel, I will take your second question on our monetization strategy in Japan. And yes, as you mentioned, we have seen a couple leading brokers in Japan gone to zero commission for Japanese stock trading. And we have reasons to believe that other brokers in Japan will probably follow suit. So, well, no one's going to make money from Japanese equities trading. But U.S. stock trading is still quite profitable. SV and Rakuten, for example, charge 45 bps for U.S. stock trading. We tend to price more aggressively than these incumbents, but we still expect to make very decent margins on U.S. stock trading. And as of the end of last year, we have seen that there are 2.3 million U.S. stock investors in Japan. That's relatively low compared to Japanese stock investors, but that has been growing pretty fast. As of the end of 2019, there were about 1 million U.S. stock investors. So over the past four years, it has more than doubled. And besides U.S. stock trading commission, we also intend to monetize over margin financing and foreign exchange fees. we observed that Japanese investors really like to trade on margin. We have seen that for the industry average number, like around 50% of their trades are placed with margin. So that's going to be a key revenue driver. And then for FX charges, we understand that in order to compensate for zero commission for Japanese stock trading, all of the brokers in Japan charge pretty hefty fees for FX. So as the trading volume of US stock trading on our platform grows, we also expect FX revenue to make a meaningful contribution. Thank you.
spk03: Thank you very much.
spk11: Thank you. Next question comes from the line of Cindy Wang with China Renaissance. Please go ahead.
spk04: Hi, thank you for the opportunity to ask a question. I have two questions for you. The first question is about the market of Japan. I want to know about the progress of the current cash flow. As I said before, the current cash flow is about 400,000. I don't know how much the exchange rate of cash flow is. If we look at the cash flow rate from the point of view of the moon, is it gradually increasing? The second question is to ask about the recent report that a company has applied for a license from a private equity trading platform. Can you tell us about the process of applying for a license and the progress of the current work in the private equity market? Is it possible to upgrade the trading function once we get the license? Now, I'm trying to find my question. Thanks for taking my question. So I have two questions. This one is related to Japan market. Can you share the cover of Japan's new paying clients program? What's the conversion rate from registered users to paying clients? And have you seen new paying clients increasing month over month? Second question is for the, if the previous subsidiary is applying for digital assets trading platform in Hong Kong, what does the progress look like? And what is your preparation work for digital assets trading platform? Would you be able to launch trading functions immediately once your license is approved? Thank you.
spk10: Thank you Cindy. I will answer your second question first and my colleague Daniel will answer your question regarding Japan. In the past few seasons, we have conducted in-depth research on the policy and dynamics of Hong Kong's supervision, including the trend of the industry, and hope to actively participate in the application of such a license. According to the requirements of the Hong Kong SFC supervision, we also submitted a license application to the virtual asset trading platform operator last week. PantherTrade is a subsidiary of a full-fledged subsidiary under Putu Group. We echo the Web3 policies advocated by the Hong Kong government, who want to build up Hong Kong as a Web3 global center. In the past several quarters, we carefully studied the policies and the regulations issued by the Hong Kong SFC. Tencentrade, a wholly subsidiary within Putu Group, submitted a VSAP license application to Hong Kong SFC last month. And we expect the whole application process may take at least six to nine months if we have the luck to get approval in principles. And we have not formed a very concrete business plan afterwards. And we will continue to modify this content in the next couple of quarters. And hopefully, we can give some new updates in the next Q2 or Q3. Thank you.
spk06: Thank you, Cindy. Let me ask you the first question about Japan. Currently, in the Japanese market, from users to opening customers, and then from opening customers to entry-level customers, the transfer rate is lower than that of other international markets. We think there are two main reasons. The first reason is that we think there are still some friction points in the opening process of our opening. Currently, in the middle and back of the Japanese securities industry, there are still some external systems that involve a lot of experience. In order to provide customers with the ability to open their accounts as soon as possible, we actually used some industry-wide arrangements. This has a certain negative impact on the user experience. In the future, we will focus on optimizing the gold process of opening accounts. Then, in the following few seasons, we will gradually replace some of the external packages in this process with our own system. Another reason why we think the conversion rate is low is because of some shortcomings in our products. As I mentioned earlier, we are currently only offering US stock and Chinese stock transactions. We expect to offer Japanese stock transactions and NISA accounts in the first quarter of next year. Although we believe that Futu's US stock transaction capability is top-notch in the Japanese market, Japanese stock is still a very important trading benchmark for local investors in Japan. We hope that we will have a better rating when we continue to promote the market. So according to some of our current user surveys, we understand that this is also one of the reasons why some users are blocking our account login. And I'm going to translate for myself. So right now in Japan, the user to client conversion rate as well as the client to paying client conversion rate are both lower than what we have observed in other international markets. And we think there are two main reasons behind it. Number one is that our account opening golden process still has a number of friction points. So far, the mid to back office in the Japan brokerage industry are still characterized by a lot of outsourced systems that have really unsatisfactory user experience. And in order to start account opening soon, we leveraged some of these outsourced systems, which really have a negative impact on our users' experience. and thus impacted the conversion rate from account opening to asset deposits. And in the next couple of quarters, we plan to invest into our account opening process and gradually replace these outsourced systems with our proprietary systems. And the second reason behind this low conversion rate so far is the lack of key trading products. And as mentioned earlier, we now only offer U.S. cash equities trading to Japan users. And in the first quarter of next year, we plan to launch Japanese stock trading as well as NISA account. Although we are really confident that Futu's U.S. stock trading capabilities lead our Japanese peers by a very wide margin, in Japan, Japanese stock investing is still very, very popular. And we understand based on our user survey that lack of Japanese equity trading is a key reason that prevents them from opening accounts with us.
spk03: Thank you.
spk11: Mr. Wang, are you done with your question?
spk05: Yes, I am done. Thank you. Thank you.
spk11: A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Peter Zhang with JP Morgan. Please go ahead.
spk07: Thank you, Mr. Guan, for giving me this opportunity. I have a follow-up question for Japan. I would like to ask, in the future, will there be a chance for users in Hong Kong or Singapore to trade Japanese stocks? Have you considered this on our product pipeline? And the second question is, the exchange rate of this quarter has decreased significantly. I would like to ask the reasons behind this and what the future trend will be. Okay, let me do the translation. My first question is a follow-up question regarding the Japan product line. I wish to understand, going forward, will the FUTU's clients in Hong Kong or Singapore market being allowed to trade Japan stock in this product pipeline? My second question is regarding the blended commission fee rate. We noticed that the blended commission fee rate declined sequentially in third quarter. We wish to understand what's the reason behind and what will be the trend going forward.
spk02: Thank you.
spk10: Okay, thank you, Peter. Let me answer your two questions. The first one is about whether Japanese stock trading will have this function in other markets. Our answer is yes, and this is already in the relevant pipeline of our products. I believe this will be of great help to other traders outside of Japan, including their oil reserves and our revenue. The second question is related to a small drop in the commission rate in the third quarter. We have explained this in several quarters before. The main reason is that there are two different payment sets for each stock transaction. One is to be collected according to the percentage and the other is to be collected according to the quantity of the stock. So, the value of the stock in each quarter, the large value of the stock and the small value of the stock, A proportion will affect us a comprehensive one Inflation rate of such an impact in this ah So this quarter's uh this inflation rate A small drop in the ratio is also because of a reason for the market in this ah Then look forward to a future situation ah we dare we are currently for a comprehensive overall inflation rate of stability Still maintain a relatively optimistic state Regarding two questions, number one is for the Japan stock trading offering to the markets outside of Japan. Our answer is definitely it would be a yes and has already been in our product headlines. Hopefully, we can launch the Japan stock trading to our clients in Hong Kong and Singapore in the near future. And we do think this kind of product offering will further help for to our client engagement in these markets and also increase the client's participation in our platform and also our top line will also be benefit arising from that. Regarding the blended commission rate fluctuation as we elaborate to the market several quarters, it is mainly due to the client's trading behaviors because our U.S. stock trading commissions do have different price menus, and one menu is actually not based on the percentage of the trading volume, but on the number of the shares. So when people trade these big blue chips or these OTC stocks, the combination will have the implications on the blood commission rate as well. In the third quarter, the fluctuation is mainly because of that. And going forward, we think the blended commission rate, if we take out this trading pattern's reasons, can maintain stable in the near future.
spk03: Thank you.
spk11: Thank you. Next question comes from the line of Lee Wan with Pocom International. Please go ahead.
spk05: Thank you for the opportunity to ask me a question. I would like to ask a question about interest income. The growth of interest income this year is that the interest income contribution is relatively large. Can you give us an explanation? For example, how much is the contribution of融資,融券 and bank deposits? And if the interest rate drops every year next year, what effect will it have on our income? Let me ask you a question. Can you give us a breakdown of interest income and what will be the impact from Fed's rate cut next year? Thank you.
spk10: Okay, I will answer the question about interest income. In general, the interest income of our clients is the ratio The contribution this year is higher than the interest rate of the RMB. Looking forward, we think the reduction of the US dollar will be very slow. At the same time, although our interest rate will be affected by a certain negative impact when the dollar is reduced, the reduction of the dollar will also stimulate the overall activity of the capital market. In the past, In terms of the interest income, yesterday the interest revenues contributed from idle cash is much bigger than the interest income derived from the margin lending and the security lending business. And going forward, we do not think, you know, the fastest rate cut will be very fast. And in circumstances when the rate cut, normally it would be helpful to the trading volumes for the whole capital markets for our clients as well. Therefore, we do think the trading revenues arising from this breakup will largely offset the potential idle cash revenue decrease.
spk03: Thank you. Ms. Van, are you done with the question?
spk05: Yes, thank you.
spk11: Thank you. Next question comes from the line of Ema Xu with Bofa Securities. Please go ahead. Ms. Ema Xu, can you go ahead with your question?
spk06: Well, it seems that Ema is not here tonight. So if operator do have any further questions on the line?
spk11: There are no more questions. So I will now hand the call back over to Mr. Yuan for closing comments. Thank you.
spk06: Sure. Yeah, so that concludes our call today. On behalf of the Food2 management team, I would like to thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you and goodbye.
spk11: Thank you. This concludes our conference for today. Thank you for participating. You may now disconnect.
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