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spk06: Hello ladies and gentlemen, welcome to Futu Holdings second quarter 2024 earnings conference call. At this time all participants are in a listen only mode. After management has 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 this conference over to your host for today's conference call, Daniel Yuan. Chief of Staff to CEO and Head of IR at Fuju. Please go ahead, sir.
spk10: Thanks, operator. And thank you for joining us today to discuss our second quarter 2024 earnings results. Joining me on the call today are Mr. Leif Lee, Chairman and Chief Executive Officer, Officer 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 risks and certainties. 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 certainties, please refer to the company's filings with the SEC, including its annual report. With that, I will now turn the call over to Leif. Leif will make his comments in Chinese, and I will translate.
spk02: Thank you for participating in today's conference. In the second quarter, we have 15.5 million real estate customers competing, with an increase of 168%. As of the end of the quarter, the total number of real estate customers exceeded 2 million, with an increase of 29% and an increase of 8%. In the first half of this year, we have completed more than 80% of the annual turnover. As a result, we will increase the number of real estate customers competing this year to 550,000 again.
spk10: Thank you all for joining our earnings call today. In the second quarter, we acquired 155,000 paying clients, representing 168% year-over-year growth. By the end of the quarter, we crossed the 2 million paying clients milestone, translating into a 29% growth year-over-year and 8% growth quarter-of-the-quarter. Six months into 2024, we have achieved over 80% of our full-year new paying client guidance. Given the strong year-to-day momentum, We would like to raise our guidance again to 550,000 new paying clients in 2024.
spk02: In a time of market chaos, the number of new customers in Hong Kong and Singapore has reached a double-digit increase. The two markets contributed to this quarter's group of more than one-third of competitive real estate customers. In Japan, we continue to strengthen product strength, replace market operations, and improve brand awareness. Competitive real estate customers have maintained a double-digit increase. The Malaysian market has a strong market share. Although the growth has slowed down, it has still contributed the most in the two consecutive quarters.
spk10: New paying clients in Hong Kong and Singapore both recorded double-digit sequential growth amid market rebound, collectively contributing to over one-third of paying client growth in the second quarter. In Japan, new paying clients grew by double-digit quarter-of-a-quarter as we continued to strengthen product offerings, iterate on marketing initiatives, and increase our brand awareness. Meanwhile, Malaysia maintained strong momentum and contributed the highest number of new paying clients among all markets two quarters in a row despite sequential deceleration.
spk02: Recently, we have launched encrypted currency transactions in Hong Kong and Singapore, which is an important product of this year. Compared to some other markets in our industry, the encryption asset penetration rate of Hong Kong and Singapore markets is not high. But over the past few years, with Hong Kong and Singapore's supervision embracing virtual assets, the general awareness of virtual assets is gradually increasing, as well as the emergence of more user-friendly virtual asset trading platforms. The encrypted asset penetration of these two markets still has a lot of room for improvement. We believe that future penetration increases will not be linear. The growth curve is also highly related to market sentiment. But when we are making product plans, compared to the pursuit of short-term currency, We are even more committed to providing customers with a diversified asset class of relevant currencies to help them cross the market cycle and at the same time increase customer wallet share.
spk10: One major product update is our recent launch of cryptocurrency trading in Hong Kong and Singapore. Compared to some other markets we operate in, we believe that the penetration of crypto in Hong Kong and Singapore has much room for growth. given their supportive regulatory environment, rising awareness of virtual assets, and the emergence of more user-friendly virtual asset trading platforms. The adoption curve will not be linear and obviously highly subjective to market sentiments. But when we develop our product roadmap, we think less about short-term monetization than offering a broader portfolio of asset classes with low correlation to help our clients navigate market cycles and thus drive higher client wallet share.
spk02: We also have a corresponding product plan in other international markets. In Japan, we are preparing for the listing of NISA stock accounts, joint funds, and U.S. stock financing functions. These functions will be opened to Japanese customers in the next few months. In Malaysia, we have recently just listed MaBi and U.S. dollar currency funds. In order to help customers grasp the investment opportunities in the Malaysian stock market, we have also launched the MaGo IPO update function. In Canada, we have just listed CashCloud,
spk10: In terms of our product roadmap for other international markets, in Japan, we are on track to launch NISA savings account, mutual funds, and U.S. margin trading in the coming months. In Malaysia, we recently rolled out Ringgit and USD-denominated money market funds. To help our clients capitalize on the vibrant local IPO market in Malaysia, we also launched a Malaysian stock IPO subscription services. In Canada, we just introduced Cash Plus product that enables clients to earn incentives on their idle cash.
spk02: In the second quarter, the market sentiment rose, and customers increased their sense of trade, leading to an increase of 44 billion Hong Kong dollars, reaching a new high in history.
spk10: Total client assets jumped 24% in the over year and 12% quarter-over-quarter to a record HK$579 billion. The growth was fueled by the robust net asset inflow across markets and the market appreciation of our clients' stock holdings. With net asset inflow recording rapid sequential growth, we have succeeded our full year 2023 number only six months into the year. In the second quarter, our clients continue to take on more leveraged positions amid uplift market sentiment. As a result, margin financing and securities lending balance climbed to an all-time high of HK$44 billion.
spk02: In Singapore, as customers continue to invest in stocks and monetary funds, the total market share of customers increased by 19%, The total client assets in Singapore grew by 19% quarter of a quarter, marking the eighth consecutive quarter of double-digit growth.
spk10: Average client assets in Malaysia recorded 45% sequential growth, while total client assets more than doubled. In Australia, average client assets realized sequential growth for three consecutive quarters.
spk02: As Hong Kong stock trading continues to warm up in the second quarter, the U.S. main stock market has hit a historic high. The total trading volume has increased by 69% compared to 21%, reaching 1.62 trillion Hong Kong dollars. This quarter, the stock market continued to increase and trading enthusiasm of high-end stocks. The exchange rate has also improved significantly in the clear change of market sentiment. As a result, Hong Kong stock trading volume increased by 28% to 3,580 billion Hong Kong dollars. As the hot trend of AI trading continued, and the hot trend of mini-stocks rolled back, the trading volume of US stocks increased by 19% to 1.24 trillion Hong Kong dollars. In the US market, A growing optimism continued into the second quarter for Hong Kong stocks and major U.S. indices notched an all-time high. Total trading volume grew to 1.62 trillion Hong Kong dollars.
spk10: of 69% year-over-year and 21% quarter-to-quarter. For Hong Kong stock trading, client interest persisted for technology and high dividend names. Trading velocity also rebounded sequentially amid a palpable shift in market sentiment. As a result, Hong Kong stock trading volume increased by 28% sequentially to HK$358 billion. Boosted by the continued AI mania and resurgence of mean stocks, U.S. stock trading volume grew by 19% quarter-over-quarter to HK$1.24 trillion. In the U.S. market, advanced options trading tools combined with user-friendly interface and extensive educational resources boosted our appeal among options traders. In the second quarter, the number of options traders in the U.S. increased by around 60% year-over-year, while the number of options contracts traded more than doubled compared to the year-ago quarter.
spk02: The financial management business has again seen significant growth in this quarter, as customers seek to diversify their investment and continue to invest more money into more secure assets such as monetary funds and U.S. bonds. Customer total assets increased by 84% in the same ratio and increased by 25% in the same ratio, reaching a ratio of about 8 billion. As of the end of the second quarter, financial management assets accounted for 14% of customer total assets, with more than 25% of customers holding financial management products.
spk10: Wealth management recorded another quarter of exceptional growth. As our clients saw diversification and continued to part more funds in safer assets like money market funds and U.S. Treasury bills, total client assets grew by 84% year over year and 25% quarter over quarter to around 80 billion Hong Kong dollars. As of quarter end, wealth management assets accounted for 14% of our total client assets and over 25% of paying clients held wealth management positions.
spk02: We have 451 IPO distribution in our clients of 21% year-over-year. We underwrote 7 of the 10 largest Hong Kong IPOs in the first half of 2024.
spk10: Next, I'd like to invite our CFO Arthur to discuss our financial performance.
spk08: Thank you, Lee and Daniel. Please allow me to walk you through our financial performance in the second quarter. All the numbers are in Hong Kong dollars unless otherwise noted. Total revenue was $3.1 billion of 26% from $2.5 billion in the second quarter of 2023. Brokerage commission and handling charging income was $1.4 billion a 45% year-over-year and a 27% Q-over-Q. The increase was mainly driven by a 69% year-over-year and a 21% Q-over-Q growth in total trading volume. Given our per share pricing model for U.S. stock trading, the blended commission rate increased from 8.1 basis point to 8.5 basis point. As a result, brokerage income grew at a faster rate than trading volume Q-over-Q. Interest income was $1.6 billion of 13% year-over-year and 18% Q-over-Q. The year-over-year and Q-over-Q increase was mainly driven by higher margin financing income due to an increase in daily average margin balance and the higher interest income from security borrowing and the lending business. Other income was $161 million of 27% year-over-year and 3% Q-over-Q. The year-over-year and the Q-over-Q increase was both primarily attributable to higher funded distribution income, while the Q-over-Q increase was partially offset by the decline in underwriting fee income. Our total costs were $574 million, an increase of 53% from $375 million in the second quarter of 2023. Brokerage commission and the handling charge expenses were $87 million, up 58% year-over-year, and up 45% Q-over-Q. The expenses grew by a wider margin than income sequentially, mainly due to the capital fee scheme for U.S. stock trading. Under the per share pricing model, we charge a maximum of 50 basis points of trading volume per order for U.S. stock trading. So when clients trade a more low-priced mean stock, as was the case in the second quarter, there will be a mismatch between the growth rate of revenue and expenses. Interest expenses were $378 million of 71% year-over-year and a 21% Q-over-Q. The year-over-year and the Q-over-Q increase was mainly driven by high interest expenses associated with our security borrowing and the lending business. Processing and servicing costs was $109 million of 11% year-over-year and 13% Q-over-Q. The year-over-year increase was largely due to higher service fee, and the Q-over-Q increase was mainly driven by higher market information and data fees. As a result, our total gross profit was $2.6 billion, an increase of 21% from $2.1 billion in the second quarter of 2023. Gross margin was 81.6%, as compared to 84.9% in the year-ago quarter. Operating expenses were up 26% year-over-year and 16% Q over Q to $1.1 billion. IND expenses were $374 million, up 3% year-over-year and 12% Q over Q. The year-over-year and the Q over Q increase was mainly driven by an increase in IND headcount to support our new markets. Selling and marketing expenses were $338 million, up 93% year-over-year, and 16% Q-over-Q. The year-over-year increase was driven by the triple-digit year-over-year growth in new paying clients, partially offset by lower client acquisition costs. The Q-over-Q increase was mainly due to the sequential increase in client acquisition costs. G&A expenses were $362 million, up 16% year-over-year, and 20% Q-over-Q. The year-over-year and QVQ increase was primarily due to an increase in headcount for GMA personnel. As a result, income from operation increased by 18% year-over-year and 24% QVQ to $1.5 billion. Operating margins declined to 47.3% from 50.6% in the second quarter of 2023, mostly due to higher marketing expenses. Our net income increased by 8% year-over-year and a 17% QVQ to $1.2 billion. Net income margin declined to 38.6% in the second quarter as compared to 41.1% in the same quarter last year. Our effective tax rate for the quarter was 15.2%. That concludes our prepared remarks. We now like to open the call to questions. Operator, please go ahead.
spk06: Thank you. To ask a question during the session, you will need to press star 11 on your telephone. Please wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
spk25: We will now take our first question.
spk06: Please stand by. And the first question comes from the line of Cindy Wang from China Renaissance. Please go ahead. Your line is now open.
spk18: Okay. the feedback from the clients, and what is your strategy for customers in this product category? Secondly, I would like to ask, because the third quarter is almost two months away, can you tell us about the trends you see on your platform, including the current trading volume, trading exchange rate, the AUM of customers, and the balance of the balance. Thanks for taking my call. I have two questions. One question is related to crypto services. So recently you have launched the crypto services in Hong Kong and Singapore. Could you provide some color on client feedback on crypto trading? And what's your client acquisition strategy? Second is basically now is around two months for the third quarter. So can you give us some lately trend for the third quarter, including like trading volume, trading velocity, AUM, and the margin financing and security lending balance? Thank you.
spk08: Thank you, Cindy. Two questions. I'll answer the second question first. The first one is about virtual assets. I'll leave it to my colleague, Yoling. From Q3 to Q4 today, we can see that our entire customer base has maintained a very strong trend. As Liv and Daniel mentioned, our entire customer base in the second quarter has created a new high in the history of our single quarter. From the performance of the third quarter, this performance is also very healthy. From the overall performance of the market, the performance of the Hong Kong market has improved in the third quarter. So the market will have a negative impact on the market. So from the point of view of customer exchange rate, including the amount of transactions, compared to the second quarter, from the current situation of the third quarter, there is still a slight improvement. So from what we see, the situation of customer demand, because in the second quarter, there will be more customers trading low-price Mi Stock. This is what I just talked about in my opening remarks, For the second quarter today, what we witnessed is still very robust client asset inflows, despite, you know, there will be some negative impacts, implications from the market-to-market loss due to the challenges that we face in Hong Kong markets. And in terms of, you know, clients trading turnover, velocity, and also the trading volume, et cetera, we both see that these indicators remain very strong and have a sequential QMQ increase. In terms of the commission rate, given that we got some benefit in the second quarter in line that a lot more clients are trading these low-value meat stock, which give us some positive uptake in terms of the take rate. So such benefit will become normalized in the third quarters so far.
spk25: Thank you very much. Thank you. Okay.
spk05: Thank you, Mr. Qi. Let me answer the first question about our encrypted asset business. On August 1st and August 12th this year, we have listed all the virtual asset trading business in Hong Kong and Singapore, providing mainstream virtual asset live trading. So far, we have a lot of customers who have activated a digital asset trading account. But due to the short time of product listing, the recent virtual asset market has seen a significant rebound. We launched cryptocurrency trading in Hong Kong and Singapore on August 1st and August 12th respectively.
spk10: and we now offer a limited number of mainstream trading pairs. So far, we have a number of clients that have activated their cryptocurrency trading accounts, but because we offered the product not long ago and because recently the cryptocurrency market experienced very significant pullback and fluctuation, the client's trading volume of cryptocurrency and client assets are both pretty small in comparison to the scale of the whole business. Right now, our focus is to continue to enhance our product capabilities and continue to provide investor education and operations to further enhance our value proposition as a one-stop asset allocation platform.
spk25: Thank you. Thank you. We will now take our next question.
spk06: And the next question comes from the line of Chih-Yao Huang from MS. Please go ahead. Your line is now open.
spk22: Okay. Thank you for giving me the opportunity. I'm Chih-Yao from Morgan Stanley. I have two questions I would like to ask. The first one is about the customer's income. We are very happy to see that the value of the customer's asset is very healthy. Please give us a little breakdown. How much is from the income and from the market? I believe the market is also a positive contribution. And then from the distribution of this domain, this gold is probably distributed from this area. What is the proportion? This is the first question. The second question is to ask about a progress in goods in Japan. I would like to ask whether the trend of the second quarter and the second quarter has been proposed. So in the third quarter, we have so far seen what the trend of goods in Japan is like. And then if it is proposed, what are the main drivers in it? On the other hand, I would also like to ask what the current state of the Japanese customer base is like. So I got two questions. One is on the could management provide more color on the Q&Q increase in client assets? How much is the inflow and how much is market driven? And in particular, where the inflows are coming from in terms of the geographics mix in QQ? And second question is on the Japanese on client acquisition? Do we see any acceleration trend in the second quarter compared to the first quarter? And how is the trend in 3Q going so far right now? And also, what's currently the client asset in Japan and where the clients are putting their money at in Japan? Thank you.
spk08: Thank you, Chih-Yao. I will take your first question and I will leave the second question to my colleague, Daniel. There is a positive impact on the asset in the market. In the second quarter, our customer asset balance is about 12%. The positive impact of the customer asset is about 10%. The remaining 2% to 3% is a positive help from the market market. From the regional point of view, Now, in terms of the benefit from our total client assets increase in the second quarter, our total client assets increased by 12% Q over Q. And to break it down, majority of the contribution actually comes from the client asset inflows in terms of the top of their accounts on cash or stock transfer, which accounts for roughly to high single-digit contribution. And the remaining 2% to 3% belongs to the market to market positive benefit. And Hong Kong and Singapore, both these are two key markets in terms of the contribution of new asset inflows, which roughly accounts for 80% of our total net asset inflow. Thank you very much.
spk10: About the second quarter of the Japanese market, the overall second quarter of Japan's supply of oil and gas customers is still a very good improvement. From the point of view of the absolute contribution of oil and gas customers, the second quarter of Japan and Malaysia actually belong to the first tier, so we think that Japan still has a very good growth. This is mainly because of the optimization of part of the environmental process, and there are also some good and accurate marketing activities in the second quarter, including the overall market. The market is also relatively strong. By the end of the second quarter, the number of Japanese users has been close to 800,000. So, our real estate customers and users are still in a very good period of growth. We have given a whole year of guidance on users, which is to get 100 to 1.5 million users at the end of the year. We are still very confident in maintaining the speed of the users. Regarding the next half of the year or next year's growth driver in the Japanese market, I think one of the most important things is that the product can continue to be updated and updated. Compared to the most mainstream stockholders in Japan, we still have a certain gap in financial products. As Liv mentioned in the opening remarks, in the next few months, we will have a lot of product benefits. Another thing is the continued construction and investment of brands. From our current experience in Japan, many investors now fully understand that Japanese users still need some time to develop a new brand, especially a foreign brand. We will continue to build on this brand, including a large power launch in our second quarter, including the invitation of celebrity ambassadors. We think these are all very important parts that can increase the popularity and credibility of our brand. In terms of customer base assets, the current Japanese customer base assets are in the amount of several thousand US dollars. Then, Q1Q also has an improved attitude. From the client's asset configuration, currently, our client's most important configuration is still in U.S. stocks. Of course, the configuration of Japanese stocks is also constantly improving. In the future, with the improvement of our Japanese stocks-related products, we believe that, according to the clients' preferences in the entire market, the configuration of Japanese stocks, including Japanese stock trading volume, will continue to improve. So overall, in the second quarter, we saw very robust net use paying clients in Japan actually recorded very decent quarter-over-quarter growth. And in terms of the absolute number of paying clients contributed, so Japan and Malaysia are in the first tier. So we were very happy with what we saw in Japan in the second quarter. And at the quarter end, we had close to 800,000 users, which we think is also very healthy growth. And previously, we gave the guidance of having 1 to 1.5 million users in Japan by year-end, and we're still very confident about that guidance. So in terms of driver for new paying client growth, two things. First of all, it's just a continued rollout of new products. So in comparison to some of the mainstream players in Japan, we still lack a couple of very key financial products. And as Leif mentioned in his opening remarks, We have a plan to offer those products in the next couple of months. And secondly, brand building is also important. As we've realized, and a lot of investors are aware right now, Japan users usually take a bit more time to trust a brand, especially a brand from overseas. So that's why we'll continue to invest in our brand, and that's also why we did a power launch and had a brand ambassador in the second quarter. These all contributed to a higher brand equity, and we'll continue to invest and brand building. And in terms of average client assets, right now it's a couple thousand U.S. dollars, and mostly clients still allocated into U.S. stocks, although the percentage of assets in Japan stocks and the percentage of trading volume from Japan stocks have been increasing. And we believe that as we continue to enhance our Japan stock product offering, these percentage contributions will continue to go up closer to the market level.
spk09: Thank you. Thank you.
spk06: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Yufan from CICC. Please go ahead. Your line is now open.
spk16: I have two questions for the management. The first one is about the progress of the new products. I would like to know how the new products will be released in the future, including in Japan and Malaysia. Will we see any new products released before the end of this year? I've got two questions here. The first question, what's our plan for new product offerings? Any product, especially in new markets like Japan and Malaysia?
spk13: And the second question, what's our progress of the shell repurchase program?
spk10: In Japan, as we mentioned earlier, our main categories are the ones that will be available in the next few months, including NISA accounts, joint funds, and U.S. margin financing and other products. In Malaysia, we actually maintained a very good pace of product listing. In the third quarter, the most important functions of quarter-to-date listing, including the IPO of Magu, including the product of Cash Plus, according to our experience in other markets, when the market is better, when the IPO market is more active, IPO acquisition is a good way to attract new customers, and it is also a good way to improve customer assets under the background of currency-based products. After that, we will also have some other functions, such as the transfer of shares of MaGu, which can help us to attract other stockholders to move their assets to MoMo. So in terms of product pipeline, for Japan, as Lee mentioned earlier, a couple of very important financial products for us and also what we intend to roll out in the next couple of months include, number one, a savings account, number two, mutual funds, and thirdly, U.S. margin financing. And for Malaysia, I think we've kept a very nice pace of new product rollout. And in the third quarter, quarter to date, we've actually rolled out Malaysian stock IPO subscription services and also the Cash Plus product, which is a money market product. And from our experience, when the IPO market is very hot, usually IPO subscription service can be a good contributor of new client growth. And during a high rate environment, money market products can help increase client assets. And in terms of future product pipeline in Malaysia, we plan to roll out this quarter the stock transfer from Malaysian stocks so that we can attract existing clients and other brokers in Malaysia. Thank you.
spk08: Okay, regarding stock repurchase, our previous stock repurchase plan was actually covered from 2024 to 2025. Up to now, we have not yet implemented it. Our existing share repurchase program actually will cover 2024 and also 2025. So far, we have not exercised this program yet. We will keep you and also other analysts and investors, our shareholders, on post if we exercise any of them.
spk14: Thank you.
spk06: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Zoe Dong from Jefferies. Please go ahead. Your line is now open.
spk15: Thank you for taking my question. I have two questions. First, what's the business model of your crypto series? And second, we have seen that interest expenses increased by 21% sequentially in Q2. Wondering what's the reason behind and how should we think about the trend going forward? Thank you.
spk08: Okay. Thank you, Zoe. Two questions. I'll answer the second one first. It's about the interest rate. We also have Daniel, a colleague of us who is thinking about the commercialization model. Daniel will make a corresponding supplement. Our entire interest expenditure in the second quarter is mainly increased with the financing and financing of our customers, especially the size of the financing of our customers. There is a relatively large positive relationship. In addition, the interest of the financing itself is subject to a change in the situation of supply and demand in the market. So this corresponding interest rate level will also have a relatively large fluctuation. Then it is from the market. This is what you just talked about. It is relatively difficult to give such a profit prediction from a preemptive prediction. Because the interest rate in this is more dependent on a trend in the market, including in the market. This loan includes a supply and demand relationship between the two parties. Now, if you don't consider this factor, with the increase in the penetration rate of our customer's vouchers, I believe that the corresponding cost, including the corresponding interest income, will continue to grow. In terms of the interest expenses increasing in the second quarter, which I think is mainly associated with our clients, you know, margin financing and the stock borrowing. In particular, in terms of stock borrowing, the pricing, the implied interest rate is more rely on the market-driven demand and the supply situation, which is very hard to give a precise estimation and very difficult to project. And if, just assume the status, as the status is called, if our penetration rate of our retail clients to continue in-house in the store borrowing universe, I think the expenses associated with such activities revenue on the top line will both further increase. Thank you.
spk10: In terms of domestic assets, because we only provide the transaction function of domestic assets, the commercialization method is very simple, which is to collect the transaction allowance. Regarding the pricing, which is also a public information. We also hope to balance the competitiveness in the market and the ability to monetize. Because Hong Kong and Singapore's encrypted assets are all included in a separate upstream. So there are some upstream costs. But overall, at the current level of pricing, we still have a good profit margin. Hong Kong and Singapore's encrypted assets are still more profitable than Hong Kong and U.S. stocks. So for cryptocurrency trading, since we now only offer the trading services, the business model is very straightforward. We charge a commission. And when we design our pricing scheme, we want to balance our market competitiveness and monetization potential. So right now in Hong Kong and Singapore, we both work with an upstream provider to offer cryptocurrency trading. And under our current pricing model, taking into consideration the upstream costs, we still enjoy pretty good gross profit margin. So the net take rate of cryptocurrency trading is higher than the net take rate for Hong Kong and U.S.
spk09: stock trading. Thank you.
spk06: Thank you. Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Emma Zhu from Bank of America Securities. Please go ahead. Your line is now open.
spk20: Thank you for giving me the opportunity to ask this question. Congratulations to the company for achieving very strong performance in the second quarter. I have two questions. The first question is about the new customer guidance, which is that we have increased to 550,000. This means that in the next two seasons, we may get an average of 180,000 users. In general, in the fourth season, the number of customers will be slower in terms of seasonality. This means that the number of customers in the third season is still quite strong. Can you tell us which markets are mainly promoting customers in the third season? We think that in the second half of the year, This is the first question. Then the second question is, we see that recently, the expectation of a decrease in interest rates has also increased a lot, including the degree of decline. And recently, the volatility of AI stocks is also relatively large. In such a market environment, have we seen any changes in the configuration of large-scale assets? For example, Taiwan Taiwan Taiwan Taiwan uh uh So I have two questions. The first question is about the client acquisition. You just raised your four-year new paying client target to $550,000, which means you need to acquire around 108,000 new paying clients per quarter. And usually your client acquisition is seasonally low in fourth quarter. that implied your third quarter client acquisition is still quite strong. So could you tell us which markets are driving your client growth in third quarter? And the second question is that given the rising expectations of red cards and then the recent wild volatilities in the AI stocks, So do you see the changes in client asset allocation, say, between the stocks, the bonds, and the options, et cetera? And in terms of the allocation within the stock, say, from the AI growth stock to value stock, and how will these changing behaviors impact your take rates? And correspondingly, given the rising expectation of red cards, how will it impact your interest income? I know it could probably have limited impact on your interest income this year, but what would be, say, that 25-day red card impact on your interest income next year? Thank you.
spk08: Okay. I will answer both questions. The first one is about That's what we talked about in the opening remarks. We have already increased the target of new customers by 400,000 to 550,000. As of the third quarter, we have a target of $550,000 a year. We are confident that we can achieve that. Of course, the fourth quarter will be uncertain, considering the election and the start of the next few weeks. In terms of the specific market for goods, in terms of the second quarter, In Hong Kong and Singapore, we have contributed more than one third of our new customers. In Japan and Malaysia, we have contributed about 40% of our customers. From the perspective of the market in the second half of the year, I predict that compared to the first half of the year, there won't be a big change in the number of customers in the market. That's the first question. The second question is related to In the current interest rate environment, we have done some static calculations, because the decrease in interest rate may have a lot of positive or negative effects. If we don't consider the second-tier index, for example, for customer transactions, the market interest rate will drop by 25 points in a static way. The profit of our entire business tax authority will probably be about 5 million to 8 million Hong Kong dollars. The negative impact is in this. If we consider the second number, if the market is affected by the cut-off, it will bring more trading volume and it will be easier to get the corresponding customers. I believe that the impact of the current stage that I just mentioned will have a fairly large proportion and will be eliminated. From the current market, in terms of the trade category, I haven't seen a significant change in the asset configuration of the client yet. However, from the perspective of our financial management products, we can see that some of the household products, whether it's national debt or corporate debt, including some of the short-term debt products, the current customer configuration ratio has increased significantly compared to the previous few seasons. In terms of the guidance for new client acquisition, as Steve mentioned in the opening remark, we have already revised our targets to 550K new paying clients for the whole year. And in the second quarter, major contributions for the new clients acquired is number one is the Hong Kong and the Singapore, which contributes over one-third of our new paying clients acquired in the second quarter. and combine Japan and Malaysia, which accounts for roughly 40% for the whole pie. And based on the quarter to date situations, we are still very confident we can achieve the guidance we mentioned before, despite there can be some uncertainties coming arising the US election in the fourth quarters. And we do expect contribution breakdown from these markets should be similar to what we have witnessed in the first half of this year. And of course, for the second question, of course, we got some negative implications from the rate cut. We have some preliminary sensitivity estimations. Every 25 basis point rate cut our pre-tax operating profit will be impacted by $5 million to $8 million. If we did not account any potential positive implications from the market trading volume increase because of the rate hike and also the benefit from the new client acquisitions for these implications. And so far, we have not witnessed a very significant client asset allocation changes arising from your observations. But in the wealth management universe, we do witness there will be more asset allocations by our clients on the fixed income products, including the treasuries and also short duration fixed income products, et cetera. Thank you.
spk00: Thank you. Very helpful.
spk06: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Charles Zhou from UBS. Please go ahead. Your line is now open.
spk07: Okay. 我有一个问题是关于货客成本,我们注意到收入端是非常 亮眼,同时这个货客成本也是得到了比较好的控制。 想问一下之后的话,就是公司有没有更新2024年有关于这个货客成本,就是client acquisition cost的一个guidance。 如果不更新的话,我们也看到目前还是有比较高的一个upside,下半年的货客总体的战略以及在核心市场我们现在的计划是怎么样的,这是第一个问题。 So first of all, congratulations to the management team. I think it's a very strong set of results and also above the consensus. So my question is regarded to the client acquisition costs. Because I think this is very well managed. So do we have any updates for the 2024 for the full year guidance? And if you don't have any new guidance or any updates, we believe there's also a decent huge upside from here as well. So could you please also share your marketing and also client acquisition strategy in several of the key markets in the second half? My second question is related to the interest income. Our understanding, there are three major components. EIDL cash interest income, margin financing and stock lending interest income, as well as the IPO financing income. So could you please just help us to split the interest income from these three components for the second quarter? Thank you.
spk08: Thank you, Charles. I will answer both questions. One is about the cost of goods. The average cost of goods in the second quarter is about 2,200 Hong Kong dollars. Compared to the first quarter, 1,700 Hong Kong dollars is about 30% higher. But there are some special reasons for the first quarter. In the first quarter, before we entered Malaysia, we had more storage users, so the conversion speed was relatively faster. Although 2,200 Hong Kong dollars have been significantly increased compared to the first quarter, compared to the beginning of the year, we gave the market 2,500 to 3,000 Hong Kong dollars. uh uh uh Although we haven't adjusted the range from $2,500 to $3,000 in the beginning of this year, from the current situation, I am optimistic about maintaining a cautious price for the whole year. I hope that this target can be lower than the low end of this range, or even lower than the range given. Regarding the second one, you mentioned interest income, because the Hong Kong IPO market has a relatively big challenge this year, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, For your Your two questions, number one is about the CAC guidance and any updates. In the second quarter, our CAC is around the 2,200 Hong Kong dollars, which have 30% Q over Q increase, versus Q1, which has a relatively very low base because of the significant contribution of new clients acquired in Malaysia. We think the situation will just be normalized in the second quarter. And for the third quarter for today, I think in terms of CAG, we still maintain it's in a relatively low level, which is below our guidance range, 2,500 to 3,000 Hong Kong dollars for the whole year. Relative speaking, I would become more constructive in terms of this CAG guidance based on the current runway I think it will be very likely located in the low end of our range or even lower than this range for the whole year. Then the breakdown of the interest income, because of the market challenges in Hong Kong and in the U.S., the interest income deriving from the IPO financing both in Hong Kong and in the U.S. is not material. And clients' idle cash and also the margin financing almost contribute equally in terms of the interest income breakdown. My feeling is the interest income from idle cash was slightly higher than the second part. Thank you very much.
spk07: OK, that's very helpful. Thank you.
spk06: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Peter Zhang from JPMorgan. Please go ahead. Your line is now open.
spk04: Thank you very much for the opportunity to ask me a question. I'm Peter from JPMorgan. I have two questions. The first question is that I would like to ask Mr. Guan to introduce us to the latest progress in the Malaysian business. For example, the current situation of customers in this quarter, the protection of military assets, Let me do the translation. Many thanks for management giving me the opportunity to ask the question. This is Peter from JPMorgan. I have two questions. My first question is on Malaysia business. I wish management could give us more details on the progress of the Malaysia business. For example, the client's net asset inflow, average client assets, client profile, and client's trading come over and what's the outlook of the Malaysia business? And my second question is about the Airstar Bank. I understand that Futu invest 40% shares into the Airstar Bank in June. We wish to understand what the rationale behind this investment and going forward, what's Futu's strategy to cooperate with this virtual bank in Hong Kong? Thank you.
spk08: Thank you, Peter. There are two questions about you. I will answer your second question about Tianjin Bank. Your first question is about Malaysia. I will ask my colleague Robin to answer it later. Regarding why FUTU wants to invest in Tianjin Bank, I think we initially hoped to participate in some cooperation in the banking business. One of the main starting points may be the needs of some of our customers. In the past 10 years, we have received a lot of feedback from users and customers As for the bank-related financial problems, we hope to use our technology to optimize and improve the banking industry in Hong Kong. This is a very important goal for us to achieve. Secondly, from the perspective of our business strategy, we do feel that many of the business scenarios of banks and some of the business scenarios of FUTU are in harmony, including some potential co-effects that may exist. For example, the business of our large-scale wealth management is in this. From a strategy of future development, because our entire project has just been completed in the second quarter, Currently, I think from the short-term and medium-term goals, we hope to contribute our capabilities to Tianjin Bank, mainly in some of our technology capabilities. So in the short term, we will focus on output, including with the existing shareholders in the bank, with the management of the bank, to be able to provide Tianjin Bank's products Now, I think the key, we think the key motivations or the reason for we to consider to do this investment, number one is we continue to get a lot of requests or suggestions from our users and the clients. in the past several years in Hong Kong, given more and more Hong Kong lines met a lot of pain points in terms of the fund transfer to the brokerage accounts. And secondly, of course, we do think, you know, in terms of our future threaded directions, there will be a lot of synergy and also same scenarios between the brokerage business, wealth management business in Futu, and also the retail banking business, and also, you know, high net worth you know, wealth management business normally provide by the bank. So far the deal was just complete in the second quarter. We work, strive very, you know, strive very hard and work very closely with the local management of Airstar Bank alongside with, you know, Xiaomi and other shareholders of Airstar to align our long-term strategy. Having said that, I think the near-term focus will be more on the product itself, especially how to contribute our R&D capabilities and technology capabilities to further foster and enhance the infrastructure of Airstars Bank's products.
spk25: Thank you.
spk05: Okay, thank you, Qiwen. Next, I will answer the questions Let's look at some questions. First, our user image. Considering that Malaysia is a trading platform for the US and Malaysia is a trading platform for the US and Malaysia is a trading platform for the US and Malaysia is a trading platform for the US and Malaysia is a trading platform for the US and Malaysia is a trading platform for the US and Malaysia is a trading platform for the US and Malaysia is a trading platform for the US and Malaysia is a trading platform for the US and Malaysia's current return cycle is clearly superior to the economic model of the unit when Singapore first started its business. By the end of Q2, the total number of registered clients in Malaysia has increased by 45% per month. Malaysia's customer assets are still rising rapidly. We also believe that the economic model of Malaysia's customers will continue to be optimized. Another problem is the growth trend of Q3. In the second quarter, the number of real estate customers in Malaysia is lower than that of Q1. The main reason is that the technology is higher in the first quarter, and the number of users Transformed into the impact of real estate customers in the first quarter and was released in the second quarter. Excluding this special situation, the overall customer trend in the second quarter of Malaysia is still maintained. It is still the market of real estate customers that contributes the most in the second quarter. In addition, it is mainly due to the influence of a brand influence in Singapore, and the leading product power in the market in Malaysia. In addition, the U.S. stock market and horse stock market in the second quarter also have some benefits to the stock market. In the second quarter, we have a lot of important product capabilities, including horse stock, including U.S. stocks, and U.S. stocks. In addition, in the third quarter, we have also launched currency funds, including horse stock's transfer capabilities, to further improve our product capabilities.
spk10: In terms of our client profiles, given our value proposition as a one-stop trading platform for Malaysian and U.S. stocks, so far the clients we have attracted have some level of investment experience, and most of them are young Asian males. and have a higher income level than the country average number. And also we've seen that the trading turnover of our Malaysian clients are meaningfully higher than the group average. So given the ARPU and CAC numbers we have seen in the second quarter, we think the payback period of Malaysia is better than when we first launched in Singapore. As at the end of the second quarter, across our different cohorts in Malaysia, net asset inflow, average client assets, all were trending month over month. And average client assets was actually up 45% queue on queue. And as our average client assets in Malaysia continue to increase, we believe the unit economics will continue to improve. So in terms of the second quarter client acquisition and the third quarter quarter-to-day trend, so the second quarter menu paying clients was down a bit sequentially, mostly because of a high base in the first quarter. That's when we were able to convert a large number of our existing users into paying clients. But apart from that, the second quarter growth was very steady, Q1Q. And we believe the strong momentum is partially due to the spillover of our brand equity accumulated in Singapore and also because there are leading product capabilities as a one-stop platform for Malaysian and U.S. stocks. And also the strong market sentiment in the second quarter also helped with client acquisitions. In the second quarter, we launched Malaysian stock IPO subscription and also automatic investment schemes for U.S. stocks and fractional shares for U.S. stocks. And for the third quarter, according to date, we launched money market funds and also stock transfer from Malaysian stocks. And for the third quarter, we expect a steady quarter-to-quarter new paying clients growth in Malaysia.
spk09: Thank you.
spk06: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Husheng from CLSA. Please go ahead. Your line is now open.
spk16: Thank you for giving me the opportunity to ask this question. I would like to ask about the ratio of Nvidia in the second quarter to the share price. And can this factor have a single impact on our cash flow? And can a trade meet caps be made? How much is the exchange rate of the national debt, debt machine and goods machine? And when will the management team consider the dividend plan? What is the share of trading and media in total U.S. trading volume? How did this single factor influence the commission rate in the second quarter? How big was the influence from mid-cap stock trading? What is a good indicator to track the change in U.S. stock trading commission rate change? And what is the fee rate in the distribution of funds, fund funds, and money market funds?
spk11: and what could be a good time for considering issuing dividends? Thanks.
spk08: Okay, let me answer these two questions. First of all, I personally don't encourage you to follow a certain stock to make such a prediction, because there will be a lot of other factors that may affect the accuracy of this prediction. In itself, this is not something uh, uh, uh, We have not done any statistics on MiSTOCK, but I believe that the ratio will not be very large. Regarding your second question, currently, the company has not yet considered a plan to split the red. I think we feel that some of our funds can be deployed in some areas where the investor's investment return rate is higher, whether it is some of our existing businesses. uh, In terms of first questions, Navida, you know, roughly accounts for our, you know, 20 to 30% of our clients' U.S. stock trading volumes in the second quarters. And for your second questions, so far we do not have any, you know, concrete dividend policy. The key reason is we think still there are huge, you know, growth potential areas which we can further deploy our capitals. And we are very confident these, you know, investments will generate more high return, which is higher than our cost of the capital. And in terms of the, you know, economics of these, you know, fund distribution or treasury trading, et cetera, which I think to some extent related to some confidentiality, you know, commercial arrangements. But the thing I can share is The arrangement is very typical, similar to the industry distribution model.
spk25: Thank you.
spk06: Thank you. Due to time constraints, I would now hand back to Daniel Huan for any closing remarks. Please go ahead.
spk10: That concludes our call today. On behalf of the Food Zoo 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 disaster relations representatives. Thank you and goodbye.
spk06: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. you Thank you. Thank you. Thank you. you Hello ladies and gentlemen, welcome to Futu Holdings second quarter 2024 earnings conference call. At this time all participants are in a listen only mode. After management has 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 this conference over to your host for today's conference call, Daniel Yuan. Chief of Staff to CEO and Head of IR at Fuju. Please go ahead, sir.
spk10: Thanks, operator. And thank you for joining us today to discuss our second quarter 2024 earnings results. Joining me on the call today are Mr. Leif Lee, Chairman and Chief Executive Officer, Officer 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 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. With that, I will now turn the call over to Leif. Leif will make his comments in Chinese, and I will translate.
spk02: Thank you for participating in today's conference. In the second quarter, we have 15.5 million real estate customers competing, with an increase of 168%. As of the end of the quarter, the total number of real estate customers exceeded 2 million, with an increase of 29% and an increase of 8%. In the first half of this year, we have completed more than 80% of the total number of customers. As a result, we will increase the number of real estate customers competing this year to 550,000 again.
spk10: Thank you all for joining our earnings call today. In the second quarter, we acquired 155,000 paying clients, representing 168% year-over-year growth. By the end of the quarter, we crossed the 2 million paying clients milestone, translating into a 29% growth year-over-year and 8% growth quarter-of-the-quarter. Six months into 2024, we have achieved over 80% of our full-year new paying client guidance. Given the strong year-to-day momentum, We would like to raise our guidance again to 550,000 new paying clients in 2024.
spk02: In a time of market chaos, the number of new customers in Hong Kong and Singapore has reached a double-digit growth. The two markets contributed to this quarter's group of more than one-third of competitive real estate customers. In Japan, we continue to strengthen product strength, replace market operations, and improve brand awareness. Competitive real estate customers have maintained a double-digit growth. The Malaysian market has a strong market share, although the growth has slowed down, but it has still contributed the most in the two consecutive quarters.
spk10: New paying clients in Hong Kong and Singapore both recorded double-digit sequential growth amid market rebound, collectively contributing to over one-third of paying client growth in the second quarter. In Japan, new paying clients grew by double-digit quarter-of-a-quarter as we continued to strengthen product offerings, iterate on marketing initiatives, and increase our brand awareness. Meanwhile, Malaysia maintained strong momentum and contributed the highest number of new paying clients among all markets two quarters in a row despite sequential deceleration.
spk02: Recently, we have launched encrypted currency transactions in Hong Kong and Singapore, which is an important product of this year. Compared to some other markets in our industry, the encryption asset penetration rate of Hong Kong and Singapore markets is not high. But over the past few years, with Hong Kong and Singapore's supervision embracing virtual assets, the general awareness of virtual assets is gradually increasing, as well as the emergence of more user-friendly virtual asset trading platforms. The encryption asset penetration rate of these two markets still has a lot of room for improvement. We believe that future penetration increases will not be linear. The growth curve is also highly related to market sentiment. But when we are making product plans, compared to pursuing short-term currencyization,
spk10: One major product update is our recent launch of cryptocurrency trading in Hong Kong and Singapore. Compared to some other markets we operate in, we believe that the penetration of crypto in Hong Kong and Singapore has much room for growth. given their supportive regulatory environment, rising awareness of virtual assets, and the emergence of more user-friendly virtual asset trading platforms. The adoption curve will not be linear and obviously highly subjective to market sentiments. But when we develop our product roadmap, we think less about short-term monetization than offering a broader portfolio of asset classes with low correlation to help our clients navigate market cycles and thus drive higher client wallet shares.
spk02: We also have a corresponding product plan in other international markets. In Japan, we are preparing for the listing of NISA stock accounts, joint funds, and US stock financing functions. These functions will be open to Japanese customers in the next few months. In Malaysia, we have recently just listed MaBi and US dollar currency funds. In order to help customers grasp the investment opportunities in the Malaysian stock market, we have also launched the MaGo IPO clear function. In Canada, we have just listed CashCloud,
spk10: In terms of our product roadmap for other international markets, in Japan, we are on track to launch NISA savings account, mutual funds, and U.S. margin trading in the coming months. In Malaysia, we recently rolled out Ringgit and USD-denominated money market funds. To help our clients capitalize on the vibrant local IPO market in Malaysia, we also launched a Malaysian stock IPO subscription services. In Canada, we just introduced Cash Plus product that enables clients to earn incentives on their idle cash.
spk02: With the increase in income and the increase in customer retention, the total asset size has surpassed the new high, and the growth rate is 24%, while the growth rate is 12%, reaching 5,790 billion Hong Kong dollars. With the increase in income and the rapid growth rate, we have surpassed the whole year's income growth rate in 2023 within six months. In the second quarter, the market sentiment rose, and customers increased their sense of trade, leading to an increase of 44 billion Hong Kong dollars, reaching a new high in history.
spk10: Total client assets jumped 24% year-over-year and 12% quarter-to-quarter to a record HK$579 billion. The growth was fueled by the robust net asset inflow across markets and the market appreciation of our clients' stock holdings. With net asset inflow recording rapid sequential growth, We have succeeded our full-year 2023 number only six months into the year. In the second quarter, our clients continued to take on more leverage positions amid uplift market sentiment. As a result, margin financing and securities lending balance climbed to an all-time high of HK$44 billion.
spk02: In Singapore, as customers continue to deposit into stocks and monetary funds, the total market share of customers increased by 19%, The total client assets in Singapore grew by 19% quarter of a quarter, marking the eighth consecutive quarter of double-digit growth.
spk10: Average client assets in Malaysia recorded 45% sequential growth, while total client assets more than doubled. In Australia, average client assets realized sequential growth for three consecutive quarters.
spk02: and high-end stocks. The exchange rate has also improved significantly in the clear change of market sentiment. Therefore, the exchange rate of Hong Kong stocks has increased by 28% to 3,580 billion Hong Kong dollars. As the hot trend of AI trading continues, and the hot trend of mini-stocks rolls around, the exchange rate of U.S. stocks has increased by 19% to 1.24 trillion Hong Kong dollars. In the US market, A growing optimism continued into the second quarter for Hong Kong stocks, and major U.S. indices notched an all-time high. Total trading volume grew to HK$1.62 trillion.
spk10: of 69% year-over-year and 21% quarter-to-quarter. For Hong Kong stock trading, client interest persisted for technology and high dividend names. Trading velocity also rebounded sequentially amid a palpable shift in market sentiment. As a result, Hong Kong stock trading volume increased by 28% sequentially to HK$358 billion. Boosted by the continued AI mania and resurgence of mean stocks, U.S. stock trading volume grew by 19% quarter of a quarter to 1.24 trillion Hong Kong dollars. In the U.S. market, advanced options trading tools combined with user-friendly interface and extensive educational resources boosted our appeal among options traders. In the second quarter, the number of options traders in the U.S. increased by around 60% year-over-year, while the number of options contracts traded more than doubled compared to the year-ago quarter.
spk02: The financial management business has once again achieved significant growth in this quarter, with customers seeking diversified investment and continuing to invest more money into more secure assets such as monetary funds and U.S. national debt. Customer total assets increased by 84% in the same ratio and increased by 25% in the same ratio, reaching about 80 billion Hong Kong dollars. As of the end of the second quarter, financial management assets accounted for 14% of customer total assets, with more than 25% of customers holding financial management products.
spk10: Wealth management recorded another quarter of exceptional growth. As our clients saw diversification and continued to part more funds in safer assets like money market funds and U.S. Treasury bills, total client assets grew by 84% year-over-year and 25% quarter-to-quarter to around $80 billion. As of quarter-end, wealth management assets accounted for 14% of our total client assets and over 25% of paying clients held wealth management positions.
spk02: We have 451 IPO distribution in our clients of 21% year-over-year. We underwrote 7 of the 10 largest Hong Kong IPOs in the first half of 2024.
spk10: Next, I'd like to invite our CFO Arthur to discuss our financial performance.
spk08: Thank you, Lee and Daniel. Please allow me to walk you through our financial performance in the second quarter. All the numbers are in Hong Kong dollars unless otherwise noted. Total revenue was $3.1 billion of 26% from $2.5 billion in the second quarter of 2023. Brokerage commission and handling charging income was $1.4 billion a 45% year-over-year and a 27% Q-over-Q. The increase was mainly driven by a 69% year-over-year and a 21% Q-over-Q growth in total trading volume. Given our per share pricing model for U.S. stock trading, the blended commission rate increased from 8.1 basis point to 8.5 basis point. As a result, brokerage income grew at a faster rate than trading volume Q-over-Q. Interest income was $1.6 billion of 13% year-over-year and 18% Q-over-Q. The year-over-year and Q-over-Q increase was mainly driven by higher margin financing income due to an increase in daily average margin balance and the higher interest income from security borrowing and the lending business. Other income was $161 million of 27% year-over-year and 3% Q-over-Q. The year-over-year and the Q-over-Q increase was both primarily attributable to higher funded distribution income, while the Q-over-Q increase was partially offset by the decline in underwriting fee income. Our total costs were $574 million, an increase of 53% from $375 million in the second quarter of 2023. Brokerage commission and the handling charge expenses were $87 million, up 58% year-over-year, and up 45% Q-over-Q. The expenses grew by a wider margin than income sequentially, mainly due to the capital fee scheme for U.S. stock trading. Under the per share pricing model, we charge a maximum of 50 basis points of trading volume per order for U.S. stock trading. So when clients trade a more low-priced mean stock, as was the case in the second quarter, there would be a mismatch between the growth rate of revenue and expenses. Interest expenses were $378 million of 71% year-over-year and a 21% Q-over-Q. The year-over-year and the Q-over-Q increase was mainly driven by high interest expenses associated with our security borrowing and the lending business. Processing and servicing costs was $109 million of 11% year-over-year and 13% QOQ. The year-over-year increase was largely due to higher service fee and the QOQ increase was mainly driven by higher market information and data fees. As a result, our total gross profit was $2.6 billion, an increase of 21% from $2.1 billion in the second quarter of 2023. Gross margin was 81.6% as compared to 84.9% in the year-ago quarter. Operating expenses were up 26% year-over-year and 16% Q over Q to $1.1 billion. IND expenses were $374 million, up 3% year-over-year and 12% Q over Q. The year-over-year and Q over Q increase was mainly driven by an increase in IND headcount to support our new markets. Selling and marketing expenses were $338 million, up 93% year-over-year, and 16% Q-over-Q. The year-over-year increase was driven by the triple-digit year-over-year growth in new paying clients, partially offset by lower client acquisition costs. The Q-over-Q increase was mainly due to the sequential increase in client acquisition costs. G&A expenses were $362 million, up 16% year-over-year, and 20% Q-over-Q. The year-over-year and QVQ increase was primarily due to an increase in headcount for GMA personnel. As a result, income from operation increased by 18% year-over-year and 24% QVQ to $1.5 billion. Operating margins declined to 47.3% from 50.6% in the second quarter of 2023, mostly due to higher marketing expenses. Our net income increased by 8% year-over-year and a 17% QQ to $1.2 billion. Net income margin declined to 38.6% in the second quarter as compared to 41.1% in the same quarter last year. Our effective tax rate for the quarter was 15.2%. That concludes our prepared remarks. We now would like to open the call to questions. Operator, please go ahead.
spk06: Thank you. To ask a question during the session, you will need to press star 11 on your telephone. Please wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
spk25: We will now take our first question.
spk06: Please stand by. And the first question comes from the line of Cindy Wang from China Renaissance. Please go ahead. Your line is now open.
spk18: Okay. the feedback of the clients, and what is your strategy for customers in this product category? Secondly, I would like to ask, because the third quarter is almost two months away, can you tell us about the trend you see on your platform, including the current trading volume, trading exchange rate, the AUM of customers, and the balance of the balance. Thanks for taking my call. I have two questions. One question is related to crypto services. So recently you have launched the crypto services in Hong Kong and Singapore. Could you provide some color on client feedback on crypto trading? And what's your client acquisition strategy? Second is basically now is around two months for the third quarter. So can you give us some lately trends for the third quarter, including like trading volume, trading velocity, AUM, and the margin financing and security lending balance? Thank you.
spk08: Thank you, Cindy. Two questions. I'll answer the second question first. The first one is about virtual assets. I'll leave it to my colleague, Yao-Ling. From the third quarter to the quarter to date, we can see that our entire customer entry rate has remained very strong. As Liv and Daniel mentioned, our entire second quarter's customer entry rate has created a new high in the history of our single quarter. From the performance of the third quarter, this performance is also very healthy. From the overall performance of the market, the performance of the Hong Kong market, there is a rebound in the third quarter. So the market will have a negative impact on the market. So from the point of view of customer exchange rate, including transaction volume, compared to the second quarter, from the current situation of the third quarter, there is still an improvement. So from what we see, a situation of a customer's collection, because in the second quarter, there will be more customers trading low-price Mi Stock. This is what I just talked about in my opening remarks, For the second quarter today, what we witnessed is still very robust client asset inflows, despite, you know, there will be some negative impacts, implications from the market-to-market loss due to the challenges that we face in Hong Kong markets. And in terms of, you know, clients trading turnover, velocity, and also the trading volume, et cetera, we both see that these indicators remain very strong and have a sequential QMQ increase. In terms of the commission rate, given that we got some benefit in the second quarter in line that a lot more clients are trading these low-value new stock, which give us some positive uptake in terms of the take rate. So such benefit will become normalized in the third quarters so far.
spk25: Thank you very much. Thank you. Thank you, Mr. Qi.
spk05: Let me answer the first question about our cryptocurrency business. On August 1st and August 12th this year, we have launched all the virtual assets trading business in Hong Kong and Singapore, providing mainstream virtual assets for live trading. So far, we have activated a number of digital assets trading accounts. But due to the short time of product listing, the virtual asset market has recently seen a significant rebound. We launched cryptocurrency trading in Hong Kong and Singapore on August 1st and August 12th, respectively.
spk10: and we now offer a limited number of mainstream trading pairs. So far, we have a number of clients that have activated their cryptocurrency trading accounts, but because we offered the product not long ago and because recently the cryptocurrency market experienced very significant pullback and fluctuation, the client's trading volume of cryptocurrency and client assets are both pretty small in comparison to the scale of the whole business. Right now, our focus is to continue to enhance our product capabilities and continue to provide investor education and operations to further enhance our value proposition as a one-stop asset allocation platform.
spk25: Thank you. Thank you. We will now take our next question.
spk06: And the next question comes from the line of Tiao Huang from MS. Please go ahead. Your line is now open.
spk22: Okay. Thank you, Ms. Guan. I have two questions. The first one is about the client's income. We are very happy to see that the cost of the client's asset is very healthy. Ms. Guan, please give us a breakdown of how much is from the income and from the market. I believe the market is also a positive contribution. Then from the distribution of this domain, this gold is probably distributed from this area. What is the proportion? This is the first question. The second question is to ask about a progress in goods in Japan. I would like to ask whether the trend of the second quarter and the second quarter has been proposed. So in the third quarter, we have so far seen what the trend of goods in Japan is like. And then if it is proposed, what are the main drivers in it? On the other hand, I would also like to ask what the current state of the Japanese customer base is like. So I got two questions. One is on the could management provide more color on the Q&Q increase in client assets? How much is the inflow and how much is market-to-market driven? And in particular, where the inflows are coming from in terms of the geographic mix in QQ? The second question is on the Japanese on client acquisition? Do we see any acceleration trend in the second quarter compared to the first quarter? And how is the trend in 3Q going so far right now? And also, what's currently the client asset in Japan and where the clients are putting their money at in Japan? Thank you.
spk08: Thank you, Chih-Yao. I will take your first question, and I will leave the second question to my colleague, Daniel. In terms of the positive impact of the entry-level capital and the market, the impact on the asset is about 12% of the total asset of our customers in the second quarter. The positive impact of the entry-level capital will be about 10%, and the remaining 2% to 3% is a positive help from the market market. From the regional point of view, In terms of the benefit from our total client assets increase in the second quarter, our total client assets increased by 12% Q over Q. And to break it down, majority of the contribution actually comes from the client asset inflows in terms of the top of their accounts on cash or stock transfer, which accounts for roughly to high single-digit contribution. And the remaining 2% to 3% belongs to the market to market positive benefit. And Hong Kong and Singapore, both these are two key markets in terms of the contribution of new asset inflows, which roughly accounts for 80% of our total net asset inflow. Thank you very much.
spk10: Now, for the second quarter of the Japanese market, the overall second quarter of Japan's supply of oil and gas customers is still a very good improvement. From the point of view of the absolute contribution of oil and gas customers, the second quarter of Japan and Malaysia actually belong to the top tier, so we think that Japan still has a very good growth. This is mainly because we may have some improvement in the environmental process, and there are also some good and accurate marketing activities in the second quarter, including the overall market. The market is also relatively strong. By the end of the second quarter, the number of Japanese users has reached nearly 800,000. So, our real estate customers and users are still in a good period of growth. We gave a whole year of guidance about users, which is to get 100 to 1.5 million users at the end of the year. We are still very confident in maintaining the speed of the users. Regarding the growth drivers in the second half of the year or next year in the Japanese market, I think one of the most important things is that the product can continue to be updated and updated. Compared to the most mainstream stockholders in Japan, we still have a certain gap in financial products. As Liv mentioned in the opening remarks, in the next few months, we will have a lot of product benefits. Another thing is the continued construction and investment of brands. From our current experience in Japan, many investors now fully understand that Japanese users still need some time to develop a new brand, especially a foreign brand. We will continue to build on this brand, including a large power launch in our second quarter, including the invitation of celebrity ambassadors. We think these are all very important parts that can increase the popularity and credibility of our brand. In terms of customer base assets, the current Japanese customer base assets are in the amount of several thousand US dollars. and P1Q has also improved. In terms of asset configuration, currently, the main configuration of our clients is in US stocks. Of course, the configuration of Japanese stocks is also constantly improving. In the future, with the improvement of related products in Japanese stocks, we believe that, according to the clients' preferences in the entire market, the configuration of Japanese stocks, including Japanese stock trading volume, should continue to improve. So overall, in the second quarter, we saw very robust net use paying clients in Japan actually record a very decent quarter-over-quarter growth. And in terms of the absolute number of paying clients contributed, so Japan and Malaysia are in the first tier. So we were very happy with what we saw in Japan in the second quarter. And at the quarter end, we had close to 800,000 users, which we think is also very healthy growth. And previously, we gave the guidance of having 1 to 1.5 million users in Japan by year-end, and we're still very confident about that guidance. So in terms of driver for new paying client growth, two things. First of all, it's just a continued rollout of new products. So in comparison to some of the mainstream players in Japan, we still lack a couple of very key financial products. And as Leif mentioned in his opening remarks, We have a plan to offer those products in the next couple of months. And secondly, brand building is also important. As we've realized and a lot of investors are aware right now, Japan users usually take a bit more time to trust a brand, especially a brand from overseas. So that's why we'll continue to invest in our brand, and that's also why we did a power launch and had a brand ambassador in the second quarter. These all contributed to a higher brand equity, and we'll continue to invest and brand building. And in terms of average client assets, right now it's a couple thousand U.S. dollars, and mostly clients still allocated into U.S. stocks, although the percentage of assets in Japan stocks and the percentage of trading volume from Japan stocks have been increasing. And we believe that as we continue to enhance our Japan stock product offering, these percentage contributions will continue to go up closer to the market level. Thank you.
spk09: Thank you.
spk06: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Yufan from CICC. Please go ahead. Your line is now open.
spk16: Thank you, Manager Chen, for giving me the opportunity to ask this question. I am Fan You, a researcher at Zhongjin Company. I have two questions to ask Manager Chen. First of all, I just mentioned the progress of new products. I would like to ask about how to look at the new products on the market in Japan and Malaysia, including in the future, including whether we will see some new products on the market by the end of this year. I've got two questions here. The first question, what's our plan for new product offerings? Any product pipeline, especially in new markets like Japan and Malaysia?
spk13: And the second question, what's our progress of the share repurchase program?
spk10: In Japan, as we mentioned earlier, our main categories are the ones that will be available in the next few months, including NISA accounts, joint funds, and U.S. margin financing and other products. In Malaysia, we actually maintained a very good pace of product listing. And then in our third quarter, in fact, the most important functions of quarter-to-date are listed, including the Daxing of MaGu IPO, and then including the products of this currency fund, this Cash Plus. Based on our experience in the market, when the market is better, when the IPO market is more active, the IPO acquisition is a good way to draw money, including the currency fund products. In the background of high-end, it is also a good way to improve customer assets. After that, we will also have some other functions, such as these transfer warehouses in MaGu, which can help us better attract some of the stockholders of other exchanges to move their assets to MoMo. So in terms of product pipeline for Japan, as Lief mentioned earlier, a couple of very important financial products for us and also what we intend to roll out in the next couple of months include number one, a savings account, number two, mutual funds, and thirdly, U.S. margin financing. And for Malaysia, I think we've kept a very nice pace of new product rollout. And in the third quarter, quarter to date, we've actually rolled out Malaysian stock IPO subscription services and also the Cash Plus product, which is a money market product. And from our experience, when the IPO market is very hot, usually IPO subscription service can be a good contributor of new client growth. And during a high-rate environment, money market products can help increase client assets. And in terms of future product pipeline in Malaysia, we plan to roll out this quarter the stock transfer from Malaysian stock so that we can attract existing clients and other brokers in Malaysia. Thank you.
spk08: Okay, regarding stock repurchase, our previous stock repurchase plan was actually covered from 2024 to 2025. Up to now, we have not yet implemented Our existing share repurchase program actually will cover 2024 and also 2025. So far, we have not exercised this program yet. We will keep you and also other analysts and investors, our shareholders, on post if we exercise any of them.
spk14: Thank you.
spk06: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Zoe Dong from Jefferies. Please go ahead. Your line is now open.
spk15: Thanks management for taking my question. I have two questions. First, what's the business model of your crypto series? And second, we have seen that interest expenses increased by 21% sequentially in Q2. Wondering what's the reason behind and how should we think about the trend going forward? Thank you.
spk08: Okay, thank you, Zoe. Two questions. I'll answer the second one first. It's about the interest rate. uh, uh, So, the interest rate level of the corresponding interest will also have a relatively large fluctuation. So, it is relatively difficult to give such a interest rate forecast from the pre-pandemic prediction that you just mentioned in the market, because the interest rate in this is more dependent on the market trend, including in the market. The relationship between the bond market and the bond market, including the bond market, is in this. In terms of the interest expenses increase in the second quarter, which I think is mainly associated with our clients, you know, margin financing and the stock borrowing. In particular, in terms of stock borrowing, the pricing, the implied interest rate is more rely on the market-driven demand and the supply situation, which is very hard to give a precise estimation and very difficult to project. And if just assume the status as the status as quote, if our penetration rate of our retail clients to continue income in the store-borrowing universe, I think the expenses associated with such activities revenue on the top line will both further increase. Thank you.
spk10: Regarding home assets, because we only provide the transaction function of home assets at the moment, so our commercialization method is very simple, which is to collect the transaction allowance. In terms of pricing, which is also public information. We also hope to balance the competitiveness in the market and the ability to monetize. As for Hong Kong and Singapore, the encrypted assets are now accepted by a separate upstream. So there are some upstream costs. But overall, at the current pricing level, we still have a good margin rate. The acceptance rate of Hong Kong and Singapore's encrypted assets is still higher than the acceptance rate of Hong Kong's U.S. stocks. So for cryptocurrency trading, since we now only offer the trading services, the business model is very straightforward. We charge a commission. And when we design our pricing scheme, we want to balance our market competitiveness and monetization potential. So right now in Hong Kong and Singapore, we both work with an upstream provider to offer cryptocurrency trading. And under our current pricing model, taking into consideration the upstream costs, we still enjoy pretty good gross profit margin. So the net take rate of cryptocurrency trading is higher than the net take rate for Hong Kong and U.S.
spk09: stock trading. Thank you.
spk06: Thank you. Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Emma Yu from Bank of America Securities. Please go ahead. Your line is now open.
spk20: Thank you for giving me the opportunity to ask this question. Congratulations to the company for achieving very strong performance in the second quarter. I have two questions. The first question is about the new customer guidance, which is that we have increased to 550,000. This means that in the next two seasons, we may get an average of 1.8 million users. In general, in the fourth season, the number of customers will be slower in terms of seasonality. This means that the number of customers in the third season is still quite strong. Can you tell us which markets are mainly promoting the number of customers in the third season? We think that in the second half of the year, This is the first question. Then the second question is, we see that recently, the expectation of a decrease in interest rates has also increased a lot, including the degree of decline. And recently, the volatility of AI stocks is also relatively large. In such a market environment, have we seen any changes in the configuration of large-scale assets? For example, to invest in some bonds or stocks. Have there been any changes in the configuration? For example, in the past, you invested more in growth and AI stocks. Now, you can invest more in some value stocks. and so on. And then this affects our take rate, that is, what impact will it have on our transformation rate? It is also about the decline. The decline will have a great impact on our interest income, especially the interest income of this client-oriented fund. I know that this year's impact may still be relatively limited because it has already So I have two questions. The first question is about the client acquisition. You just raised your four-year new paying client target to $550,000, which means you need to acquire around 108,000 new paying clients per quarter. And usually your client acquisition is seasonally low in fourth quarter. that implied your third quarter client acquisition is still quite strong. So could you tell us which markets are driving your client growth in third quarter? And the second question is that given the rising expectations of red cards and then the recent wild volatilities in the AI stocks, So do you see the changes in client asset allocation, say between the stocks, the bonds and the options, et cetera? And in terms of the allocation within the stock, say from the AI growth stock to value stock, and how will these changing behaviors impact your take rates? And correspondingly, given the rising expectation of red cards, how will it impact your interest income? I know it could probably have limited impact on your interest income this year, but what would be, say, that 25-day red card impact on your interest income next year? Thank you.
spk08: Okay. I'll answer both questions. The first one is about... What could you eat? Now, just like what we talked about in the opening remark, we've already put a target of 400,000 new customers to 550,000 all year round. As of the current third quarter, I think we have a target of 550,000 all year round. uh, uh, In Hong Kong and Singapore, we have contributed more than one third of our new customers. In Japan and Malaysia, we have contributed about 40% of our new customers. From the perspective of the market in the second half of the year, I predict that compared to the first half of the year, there won't be a big change in the contribution ratio of the whole market. That's the first question. The second question is about uh uh about 5 million to 8 million Hong Kong dollars. The negative impact is in this. If we consider the second part, if the market is affected by the cut-off, there will be more trading volume and it will be easier to get the corresponding customers. I believe that the impact I just mentioned will have a considerable proportion and will be eliminated. From the current market, in terms of the trade, I haven't seen a major change in the asset configuration of the client yet, but I can share that from the point of view of our wealth management products, some of the household products, whether it is national debt or corporate debt, including some short-term and long-term products, the current customer configuration ratio is a relatively obvious improvement compared to the previous few seasons. In terms of the guidance for new client acquisition, as Steve mentioned in the opening remark, we have already revised our targets to 550K new paying clients for the whole year. And in the second quarter, major contributions for the new clients acquired is number one is the Hong Kong and the Singapore, which contributes over one-third of our new paying clients acquired in the second quarter. and combine Japan and Malaysia, which accounts for roughly 40% for the whole pie. And based on the quarter to date situations, we are still very confident we can achieve the guidance we mentioned before, despite there can be some uncertainties coming arising the US election in the fourth quarters. And we do expect contribution breakdown from these markets should be similar to what we have witnessed in the first half of this year. And of course, for the second question, of course, we got some negative implications from the rate cut. We have some preliminary sensitivity estimations. Every 25 basis point rate cut our pre-tax operating profit will be impacted by $5 million to $8 million. If we did not account any potential positive implications from the market trading volume increase because of the rate hike and also the benefit from the new client acquisitions for these implications. And so far, we have not witnessed a very significant client asset allocation changes arising from your observations. But in the wealth management universe, we do witness there will be more asset allocations by our clients on the fixed income products, including the treasuries, and also short duration fixed income products, et cetera. Thank you.
spk00: Thank you. Very helpful.
spk06: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Charles Zhou from UBS. Please go ahead. Your line is now open.
spk07: Okay. 我有一个问题是关于货客成本,我们注意到收入端是非常亮眼,同时这个货客成本也是得到了比 较好的控制。 想问一下之后的话,就是公司有没有更新2024年有关于这个货客成本,就是client acquisition cost的一个guidance。 如果不更新的话,我们也看到目前还是有比较高的一个upside,下半年的货客总体的战略以及在核心市场我们现在的计划是怎么样的,这是第一个问题。 So first of all, congratulations to the management team. I think it's a very strong set of results and also above the consensus. So my question is regarding to the client acquisition costs. Because I think this is very well managed. So do we have any updates for the 2024 for the full year guidance? And if you don't have any new guidance or any updates, we believe there's also a decent huge upside from here as well. So could you please also share your marketing and also client acquisition strategy in several of the key markets in the second half? My second question is related to the interest income. Our understanding, there are three major components. EIDL cash interest income, margins financing and stock lending interest income, as well as the IPO financing income. So could you please just help us to split the interest income from these three components for the second quarter? Thank you.
spk08: Thank you, Charles. I will answer both questions. One is about the cost of goods. The average cost of goods in the second quarter is about 2,200 Hong Kong dollars. Compared to the first quarter, 1,700 Hong Kong dollars is about 30% higher. But there are some special reasons for the first quarter. In the first quarter, before we entered Malaysia, we had more storage users, so the conversion speed was relatively faster. Now, uh, uh, In the beginning of the year, we gave 2,500 to 3,000 Hong Kong dollars to the market. Our CAC guidance still has a significant decline. From now on, the cost level of our goods in the entire third quarter remains at a relatively good level. From now on, it is still lower than the 2,500 to 3,000 Hong Kong dollars that we set in the beginning of the year. Although we haven't adjusted the range from $2,500 to $3,000 in the beginning of the year, but from the current situation, I maintain a cautious optimism for the cost of goods throughout the year. I hope that the target can be lower than the range of this range, or even lower than the range of this range. Regarding the second one, you mentioned interest income, because the Hong Kong IPO market has a bigger challenge this year, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including the number of IPOs in the US, including For your Your two questions, number one is about the CAC guidance and any updates. In the second quarter, our CAG is around the 2,200 Hong Kong dollars, which have 30% Q over Q increase, versus Q1, which has a relatively very low base because of the significant contribution of new clients acquired in Malaysia. We think the situation will just be normalized in the second quarter. And for the third quarter for today, I think in terms of CAG, we still maintain it's in a relatively low level, which is below our guidance range, $2,500 to $3,000 for the whole year. Relatively speaking, I would become more constructive in terms of this CAG guidance based on the current runway I think it will be very likely located in the low end of our range or even lower than this range for the whole year. Then the breakdown of the interest income because of the market challenges in Hong Kong and in the U.S. The interest income deriving from the IPO financing both in Hong Kong and in the U.S. is not material. And clients' idle cash and also the margin financing almost contribute equally in terms of the interest income breakdown. My feeling is the interest income from idle cash was slightly higher than the second part. Thank you very much.
spk07: OK, that's very helpful. Thank you.
spk06: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Peter Zhang from JP Morgan. Please go ahead. Your line is now open.
spk04: Thank you very much for the opportunity to ask me a question. I'm Peter from Morgan. I have two questions. The first question is that I would like to ask the management to introduce us to the latest progress of the Malaysian business. For example, the current situation of the client in this quarter, the protection of military assets, Let me do the translation. Many thanks for management giving me the opportunity to ask the question. This is Peter from JP Morgan. I have two questions. My first question is on Malaysia business. I wish management could give us more details on the progress of the Malaysia business. For example, the client's net asset inflow, average client assets, client profile, and client's trading come over and what's the outlook of the Malaysia business? And my second question is about the Airstar Bank. I understand that Futu invests 40% shares into the Airstar Bank in June. We wish to understand what the rationale behind this investment and going forward, what's Futu's strategy to cooperate with this virtual bank in Hong Kong? Thank you.
spk08: Thank you, Peter. There are two questions about you. I will answer your second question about Tianjin Bank. Your first question is about Malaysia. I will ask my colleague Robin to answer it later. Regarding FUT, why do you want to invest in Tianjin Bank? I think we initially wanted to participate in some cooperation in the banking business. One of the main starting points may be the needs of some of our customers. In the past 10 years, we have received a lot of feedback from users and customers You mentioned some of the bank's intentions. We hope to use our technology to improve the banking industry in Hong Kong. We hope to improve the banking industry in Hong Kong. We hope to improve the banking industry in Hong Kong. Secondly, from the perspective of our business strategy, we do feel that many of the business scenarios of the banks and some of the business scenarios of FUTU are in harmony, including some potential co-effects. For example, the business of our large-scale wealth management is in this. From the perspective of the future development strategy, because our entire project has just been completed in the second quarter, At present, I think from the short-term and medium-term goals, we have more to do with how we can contribute to Tianjin Bank, to contribute our capabilities, mainly in some of our technology capabilities. So in the short term, we will focus on output, including with the existing shareholders in the bank, with the management of the bank, to be able to provide the products of Tianjin Bank especially in IT infrastructure, to make a big change. We hope to build a foundation for Tianjin Hang's products in the future. We think the key motivations or the reason for we to consider to do this investment, number one is we continue to get a lot of requests or suggestions from our users and the clients. in the past several years in Hong Kong, given more and more Hong Kong lines met a lot of pain points in terms of the fund transfer to the brokerage accounts. And secondly, of course, we do think, you know, in terms of our future threaded directions, there will be a lot of synergy and also same scenarios between the brokerage business, wealth management business in Futu, and also the retail banking business, and also, you know, high net worths you know, wealth management business normally provide by the bank. So far the deal was just complete in the second quarter. We work, strive very, you know, strive very hard and work very closely with the local management of Airstar Bank alongside with, you know, Xiaomi and other shareholders of Airstar to align our long-term strategy. Having said that, I think the near-term focus will be more on the product itself, especially, you know, how to, you know, contribute our R&D capabilities and technology capabilities to further foster and enhance the infrastructure of the commercial, of Airstars Bank's products.
spk25: Thank you.
spk05: Okay, thank you, Qiwen. Next, I will answer some questions First of all, let's look at our user image. Considering that Malaysia is a trading platform for the stock market and the US stock market, most of the clients in Malaysia have a certain investment experience, mainly young Chinese men, and their income is relatively high. In addition, the exchange rate of Malaysian clients is significantly higher than the average exchange rate of the group. According to our APU and CAC data in the second quarter, Malaysia's current return cycle is obviously due to the economic model of the unit when Singapore first started its business. As of the end of Q2, the total number of investors in Malaysia has increased by 45% every month. The number of investors in Malaysia has increased by 45% every month. Malaysia's customer assets are still increasing rapidly, but we also believe that the economic model of Malaysia will continue to be optimized. Another problem is the growth trend of Q3. First of all, the number of real estate customers in Malaysia in the second quarter is lower than that of Q1. The main reason is that the technology is higher in the first quarter, and the number of users has been transformed into the impact of real estate customers and has been released in the first quarter. Except for this special situation, the overall customer trend in Malaysia in the second quarter is still stable. It is still the market of the most real estate customers in the second quarter. In addition, the customer market that can keep the file is mainly due to the influence of a brand influence in Singapore and the leading product power in Malaysia in the first quarter. In addition, the U.S. stock market and horse stock market in the second quarter also have some benefits to the stock market. In the second quarter, we have a lot of important product capabilities, including horse stock, including U.S. stocks, and U.S. stocks. In addition, in the third quarter, we have already launched currency funds, including horse stock's transfer capabilities, to further improve our product capabilities.
spk10: In terms of our client profiles, given our value proposition as a one-stop trading platform for Malaysian and U.S. stocks, so far the clients we have attracted have some level of investment experience, and most of them are young Asian males. and have a higher income level than the country average number. And also we've seen that the trading turnover of our Malaysian clients are meaningfully higher than the group average. So given the ARPU and CAC numbers we have seen in the second quarter, we think the payback period of Malaysia is better than when we first launched in Singapore. As at the end of the second quarter, across our different cohorts in Malaysia, net asset inflow, average client assets, all were trending up month over month. And average client assets was actually up 45% queue on queue. And as our average client assets in Malaysia continue to increase, we believe the unit economics will continue to improve. So in terms of the second quarter client acquisition and the third quarter, a quarter-to-day trend, so the second quarter Nanyu Payne clients was down a bit sequentially, mostly because of a high base in the first quarter. That's when we were able to convert a large number of our existing users into paying clients. But apart from that, the second quarter growth was very steady, queue on queue. And we believe the strong momentum is partially due to the spillover of our brand equity accumulated in Singapore and also because there are leading product capabilities as a one-stop platform for Malaysian and U.S. stocks. And also the strong market sentiment in the second quarter also helped with client acquisitions. In the second quarter, we launched Malaysian stock IPO subscription and also automatic investment schemes for U.S. stocks and fractional shares for U.S. stocks. And for the third quarter, according to date, we launched money market funds and also stock transfer from Malaysian stocks. And for the third quarter, we expect a steady quarter-to-quarter new paying clients growth in Malaysia.
spk09: Thank you.
spk06: Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Husheng from CLSA. Please go ahead. Your line is now open.
spk16: Thank you for giving me the opportunity to ask this question. I would like to ask about the ratio of NVIDIA in the second-tier market share market. And can this factor have an impact on our turnover rate? And can we make a trade meet caps? What is the impact of the exchange rate? I want to find a good indicator that can track the changes in the exchange rate of each stock. Then there are two small questions. One is, what is the exchange rate of the sale of national debt, debt machine and goods machine? And when will the management team consider a split plan? What is the share of trading NVIDIA in total US trading volume? How did this single factor influence the commission rate in second quarter? How big was the influence from mid cap stock trading? What is a good indicator to track the change in US stock trading commission rate change and what is the fee rate in the distribution of funds and money market funds and what could be a good timing for considering issuing dividends?
spk11: Thanks.
spk08: Okay, I will answer these two questions. First of all, I personally do not encourage everyone to track a certain stock to make such a prediction because there will be a lot of other factors that may affect the accuracy of this prediction. This is not the most important purpose for us to do this commercial implementation. But from what we can see in the second quarter, the share of Inuita's stock is relatively large in terms of the share of our entire customer's U.S. stock. It will be around 20% to 30% of the stock. We haven't done any statistics on the stock. But I don't think the ratio will be that big. Regarding your second question, the company hasn't thought about the dividend yet. I think we can deploy some of our funds uh uh In terms of first questions, Navida, you know, roughly accounts for our, you know, 20 to 30% of our clients' US stock trading volumes in the second quarters. And for your second question, so far we do not have any concrete dividend policy. The key reason is we think still there are huge growth potential areas which we can further deploy our capitals. And we are very confident these investments will generate more high return, which is higher than our cost of the capital. And in terms of the, you know, economics of these, you know, fund distribution or treasury trading, et cetera, which I think to some extent related to some confidentiality, you know, commercial arrangements. But the only thing I can share is the arrangement is very typical, similar to the industry, you know, distribution model. Thank you.
spk06: Thank you. Due to time constraints, I would now hand back to Daniel Huan for any closing remarks. Please go ahead.
spk10: That concludes our call today. On behalf of the FUSU 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 disaster relations representatives. Thank you and goodbye.
spk06: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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