Futu Holdings Limited

gentlemen, welcome to Futu Holdings' first quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Daniel Yuan, Chief of Staff of 2CEO, Head of Strategy and IR at Futu. Please go ahead.

Thanks, Operator, and thank you for joining us today to discuss our first quarter 2025 earnings results. Joining me on the call today are Mr. Lee Fleet, Chairman and Chief Executive Officer, Arthur Chen, Chief Financial Officer, and Robin Xu, Senior Vice President. As a reminder, today's call may include forward-looking statements, which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control. forward-looking statements 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.

Thank you for attending today's conference. We achieved a strong growth in the first quarter of 2025. Competitors with assets of about 26.2 million increased by 48% compared to a growth of 22%. The total number of asset customers reached 2.7 million, which increased by 42% in the same period last year, and increased by 110 million in the previous quarter. By the end of the first quarter, Thank you all for joining our earnings call today.

We kicked off 2025 with strong momentum, adding approximately 262,000 new funded accounts in the first quarter, up 48% year-over-year and 22% quarter-over-quarter. By quarter-end, total funded accounts stood at 2.7 million, a 42% increase from a year ago and an 11% rise sequentially. With a third of our annual target already in the bag, we are tracking well against our guidance of 800,000 net new funded accounts in 2025.

Thanks to the warm-up of the Chinese stock market, the Hong Kong market has been competing with asset customers for two consecutive seasons. The active Hong Kong stock IPO this season has also helped the growth of new customers and increased the activity of stock users. We always believe that strong brand influence, first-class user experience, and superior execution capabilities can better grasp market opportunities and continue to grow. As we continue to optimize the user experience of active traders, the growth of real estate customers in the U.S. market is also increasing. Moomoo's appearance in New York-style brand ads has further improved its brand awareness in the local market and increased the connection with retail investors.

For the second quarter in a row, Hong Kong market led in new funded accounts amid a risk-all mood for China equities. An active IPO calendar also helped acquire new clients while reactivating previously dormant ones. We believe that brokers with strong brand equity, seamless user experience, and superior execution capabilities are best positioned to convert market tailwinds into sustained growth. Funded account growth in the U.S. faked a pace as we enhanced the platform experience for active traders. Our Take Charge of Your Trading campaign in New York City also boosted brand visibility and deepened engagement with retail investors.

With accurate and efficient market promotion and a smooth and convenient Mapo IPO acquisition experience, Malaysia has made the fastest competitive real estate customer growth in the seven markets. Looking forward to the future, Malaysia delivers the fastest sequential growth in new funded accounts across all seven markets.

fueled by effective marketing campaigns and our seamless Malaysian IPO subscription experience. Looking ahead, we still see significant runway for market share expansion and remain committed to product localization and brand investment. In Japan, new funded accounts saw strong sequential growth and reached a historic high, reaffirming our position as the preferred platform for U.S. equity trading among Japanese retail investors.

Among the many new products launched in the first quarter, The most outstanding feature is NiuNiu AI, a smart investment assistant that is based on free financial data and investment community survey training. This episode of searching for questions and answering questions can be combined with the use of scenes to provide more targeted answers for retail investors. Since the launch, NiuNiu AI has received widespread praise, and the satisfaction of users is about 90%. Among the products we shipped in the first quarter, the highlight was Food2Bull AI, a smart investment assistant trained on Food2's proprietary financial data and investor community insights.

This integrated solution combines AI-powered search, Q&A, and customer support, offering context-aware responses tailored to retail investors. Since launch, it has received overwhelmingly positive feedback, with a satisfaction rate of around 90%. It has demonstrated significantly higher accuracy and professionalism in answering investment-related questions than general-purpose models. We plan to roll out similar AI offerings to other international markets in the second quarter to empower investors globally.

We also launched a new generation of double-decker versions in the first quarter, using the new technology framework of Windows, MacOS, and Linux. The new platform supports the optimization strategy of direct construction by decommissioning, and based on the users' views on investment standards, In the first quarter, we also launched a brand new desktop version of Food2Go, built on a new framework compatible with Windows, macOS, and Linux.

This next-generation version features intuitive drag-and-drop tools for building quantitative strategies and enumerates multi-like option strategies that reflect clients' views on the security, bringing institutional-grade functionalities in a more user-friendly manner. In Japan, we introduced U.S. fractional shares trading in February to enhance accessibility, followed by the April launch of U.S. options trading to help clients better capture market movements.

According to the record, the total total asset of customers reached 8,298 billion Hong Kong dollars with a growth of 60% and a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% with a return of 12% Total client assets reached HK$830 billion.

marking a 60% increase year-over-year and a 12% increase quarter-over-quarter. The growth was primarily driven by record net asset inflow. The rally of Hong Kong equities, led by large-cap tech names, drove significant asset inflow. Total client assets in Singapore rose 11% sequentially, marking the 11th consecutive quarter of double-digit growth, thanks to robust inflow into U.S. equities and wealth management products. In Canada and Australia, average client assets increased for the fifth consecutive quarter, underscoring improving client quality and growing brand trust. Margin financing and securities lending balance closed the quarter at HK$50.3 billion, largely stable from the prior quarter, as clients delivered in March amid market pullback.

The total trade volume of a company reached HK$3.2 trillion, with a growth of 140% and an increase of 11%. The exchange rate of each share increased by 8% to HK$2.25 billion, mainly driven by the customer's super-thick supply of semiconductors and technology stocks. The exchange rate of Hong Kong shares increased by 21% to HK$91.6 billion. Hong Kong shares' investment sentiment has risen sharply under the promotion of Dixit's related industry. In the U.S. market, equity trading activity continues to rise. Whether it is the number of equity trading customers or the number of contract sales, the double-digit increase in the number of contracts has been achieved. The increase in equity contract sales has also created a new high in the history of single-digit.

Total trading volume reached HK$3.22 trillion in the first quarter, up 140% year-over-year and 11% quarter-over-quarter. U.S. equity trading rose 8% sequentially to HK$2.25 trillion, supported by bottom fishing of semiconductor and technology stocks. Trading volume in Hong Kong equities advanced 21% quarter-over-quarter to HK$916 billion, lifted by a resurgence in investor sentiment amid the deep-seek-induced rally. In the U.S., we saw double-digit sequential growth in both the number of options traders and the number of options contracts traded, with the latter reaching its historic high.

At the end of the quarter, the financial management of customer assets reached 1,392 billion Hong Kong dollars, which increased by 118% in the same ratio and increased by 26% in the same ratio. The share of asset customers holding financial management products increased by 29% in the same ratio. In the first quarter, financial management assets were mainly left to monetary funds, which reflected the customers' bias towards low-risk assets in the context of market fluctuations. At the same time, customers' emphasis on the configuration of bond funds The demand for structural leases continues to rise, especially in the Singapore market. In terms of product innovation, we have expanded the structural leasing category of international foreign exchange in Hong Kong and Singapore, and launched a full-size fund in Malaysia, and launched a currency fund in the U.S. in Japan to better satisfy customers' diversification needs in cash management.

Wealth management client assets reached HK$139.2 billion as a quarter end, up 118% year-over-year and 26% quarter-of-a-quarter. 29% of funded accounts held wealth management products, a further sequential increase. A big part of the inflow was driven by money market funds, as clients flocked to safe haven assets amid market volatility. At the same time, we saw rising allocations into bond funds and strong demand for structured notes, especially in Singapore.

In Hong Kong and Singapore, we experienced expanded our structured product lineup with FX-linked nodes.

In Malaysia, we onboarded equity funds, while in Japan, we rolled out U.S.

dollar-denominated money market funds to better serve clients' cash management needs. Among them, Furuk Group and Gumin Control Group have chosen Futu as their only partner. Among the top-notch ice-cold IPOs, more than 70,000 customers participated in the update through the Futu platform. The total purchase volume has exceeded 100 million Hong Kong dollars. The total purchase volume and the number of buyers are ranked first among all the traders. We observed that High-temperature IPOs can usually significantly increase customer activity and drive stock transactions and capital inflows.

As of quarter end, we had 498 IPO distribution and IR clients, up 16% year-over-year. In the first quarter, we participated in several landmark Hong Kong listings as joint lead manager, including those of Box Group and Gu Ming Holdings, where we acted as the exclusive online broker for IPO distribution. Notably, in the highly anticipated Mishue Group IPO, 70,000 clients contributed to over HK$1 trillion in subscription amount, putting us first among all brokers in both total subscription amount and number of subscribers. We observed that these high-profile IPOs typically lead to higher client engagement, stock trading volume, and asset inflow.

Next, let's welcome our Chief Financial Officer, Arthur, to introduce our financial performance.

Next, I'd like to invite our CFO, Arthur, to discuss our financial performance.

Thank you, Liv and Daniel. Please allow me to walk you through our financial performance in the first quarter. All the numbers are in Hong Kong dollars and less otherwise noted. Total revenue was $4.7 billion, up 81% from $2.6 billion in the first quarter of 2024. Brokerage commission and handling charge income was $2.3 billion, an increase of 113% year-over-year and 12% Q-by-Q. The year-over-year increase was mainly driven by higher trading volume, partially offset by the decline in blended commission rate. The year-over-year decline in blended commission rate was mainly driven by changes in product mix and a higher average order size for Hong Kong stock trading. The Q over Q increase was mainly driven by the sequential growth in trading volume. Interest income was 2.1 billion, 53% year-over-year and 2% Q over Q. The yearly increase was driven by high interest income from security borrowing and the lending business, margin financing, and the bank deposits. The Q over Q increase was driven by higher margin financing income, as well as higher interest income from security borrowing and the lending business, partially offset by lower interest income from bank deposits due to lower interest rate on clients' cash deposits. Other income was $314 million, up 101% year-over-year and down 11% year-over-year. The year-over-year increase was primarily attributable to higher fund distribution service income and currency exchange income. Our total cost was $749 million, an increase of 59% from $470 million in the first quarter of 2024. Brokerage commission and the handling charge expenses was $144 million, up 138% year-over-year and a 28% Q-over-Q. Both the year-over-year and the Q-over-Q increase was roughly in line with the movement of our brokerage commission and the handling charge income. Interest expenses were $469 million, up 50% year-over-year and a down 9% Q-over-Q. The year-over-year increase was driven by higher interest expenses associated with our security borrowing and the lending business, and higher margin financing interest expenses. The Q over Q decrease was mainly due to lower margin financing interest expenses and the lower interest expenses associated with our security borrowing and the lending business. Processing and the servicing costs were $136 million of 44% and a down 10% Q over Q. The year-over-year increase was largely due to higher market information and data fee for enhanced market data coverage. And the Q over Q decline was mainly driven by lower system usage fee as well as lower market information and the data fees. As a result, our total gross profit was $3.9 billion, an increase of 86% from $2.1 billion in the first quarter of 2024. Gross margin was 84% as compared to 81.9% in the first quarter of 2024. Operating expenses were up 36% year-over-year and down 12% Q-over-Q to $1.3 billion. R&D expenses were $386 million, up 15% year-over-year and down 3% Q-over-Q. The year-over-year increase was primarily driven by investing in AI capabilities and the related technology initiatives. The Q-over-Q decline was mainly due to the sequential decrease in R&D headcount. Selling and marketing expenses were $459 million of 57% year-over-year and down 1% Q-over-Q. The year-over-year increase was roughly in line with the growth of our new fund accounts. The Q-over-Q decrease was mainly due to lower client acquisition costs, partially offset by the sequential increase in new fund accounts. G&A expenses were $415 million of 38% year-over-year and down 28% Q-over-Q. The year-over-year increase was primarily due to an increase in the general administrative headcount to support overseas market development. And the QVQ decrease was mainly due to bonus accrual for general administrative personnel in the previous quarter. As a result, income from operations increased 125% year-over-year and 21% QVQ to $2.7 billion. Operating margin increased to 57.2% from 46% in the first quarter of 2024, mostly due to strong top-line growth and operating leverage. Income increased by 107% year-over-year and 15% Q-by-Q to $2.1 billion. Net income margin expanded to 45.6% in the first quarter as compared to 39.9% in the same quarter last year. Our effective tax rate for the quarter was 18.6%. That concludes our prepared remarks. We now like to open the call to questions. Operator, please go ahead.

Thank you. As a reminder, if you'd like to ask questions, please press star 11 and wait for a name to be announced. If you'd like to cancel a request, please press star 11 again. One moment for the first question. First question comes from Cindy Wang of China Renaissance. Please go ahead.

Thank you for giving me the opportunity to ask this question. And congratulations to the company for once again having a very good performance. I have two questions here. The first one I want to ask, because in April and May, we saw a general fluctuation of U.S. stocks and Hong Kong stocks, which is relatively large. From the recovery platform, the current trend of an investor's trade exchange rate, trade volume and exchange rate will help us look at it. The second question is, we have recently seen that in the recent period, Thanks for taking my call. I have two questions here. First, the overall Hong Kong and US stock market fluctuated greatly in April and May. Could you give us some color on the trading velocity, trading volume, and the margin financing security lending balance on your platform so far in second quarter? Second question is, recently we see Futu Bull and the Moomoo launch membership program. Could you let us know what the business model looks like for this program and how many paying clients have already subscribed these services? In the long run, what do you expect the benefits could bring to the Futu? Thank you.

Cindy, I'll ask my colleague Daniel to answer your first question.

I'll answer the second one. Thank you. Cindy, let me introduce the current situation in the second quarter of April and May. Although the growth of clients, the growth of asset clients, is higher than in the first quarter, compared to the decline of the double-digit number. But overall, our customer base is still very strong in the second quarter. From the current customer trend, we are very confident in leading 800,000 customers throughout the year. Under high market fluctuations, customers' interest in trading remains at a very high level. According to the current run rate, we expect that the trading volume will increase further. The mood of customers entering the gold market is also very high. Also, through the run rate, it can be seen that entering the gold market may remain at a very high level compared to the first quarter. And with the rebound of the market in April, the entire market-to-market is also a positive influence that can promote further improvement of customer AUM. So the new funded accounts in the second quarter will probably see double-digit sequential decrease sequentially, mostly due to a very high base in the first quarter. But overall, we maintain very strong client acquisition momentum in the second quarter. And we are very confident to hit our 800,000 new paying clients guidance for 2025. And with very big market volatility, clients continue to trade very actively And based on the current run rate, we expect a further sequential increase in total trading volume. Clients also deposited a lot of assets into our platform. According to date, based on the run rate, net asset inflow will stay at a very high level, similar to what we saw in the first quarter. Coupled with the mark-to-market positive impact since the second half of April due to the market rebound, we expect a further sequential lift to our total client assets. Thank you.

Let me introduce the case of our membership. This is more likely due to the different needs of our customers, combined with the different asset sizes of our customers, as well as some contributions to our income, including their different needs for investment products. We will package different member systems and corresponding rights for our customers. For example, there are some member rights, including some choices for more financial products, especially for some other assets, In terms of the membership programs we've launched recently, it is more catered to our wealth management products clients. particularly for these clients with huge assets or higher trading velocity, or even have some particular risk appetite into some alternative wealth management products. So we will start to layer different clients in terms of their risk appetite, their client assets, and the different product needs. Given we just launched the programs recently, the penetration and the absolute number of these membership clients versus our total clients, the proportion is still very small.

Thank you. Thank you for the questions. One moment for the next question. Our next question comes from Charles Cho from UBS. Please go ahead.

Thank you for the opportunity to ask me this question. First of all, I would like to congratulate the management team on achieving a very good season and exceeding market expectations. I have two questions. First, I would like to ask the management team to introduce the current situation of crypto trading and its progress. In addition, we have also noticed that Hong Kong has recently issued some new projects related to stable currency. There are also some other companies listed in Hong Kong. This stock price has a relatively good performance. I would like to ask the company about the stable currency. What are the influences and implications for our company? This is the first question. Secondly, we also noticed that some news recently talked about some overseas investment income of mainland Chinese residents, which may need to pay taxes. I want to ask if this has an impact on the customer flow and customer AOM of the company in the second quarter. How should we look at this question? Okay, let me translate my own question. So first of all, congratulations to the management. I think it's a very strong set of results and beat the consensus and also our estimate. So I have two questions. The first one, could you please maybe just give us a little bit more colors about the timeline of your crypto trading business and also the implication of the passage of the Hong Kong stable coins bill recently to your company? The second question is about, can we talk about the customer retention and also the client AUM following the rising recent concern over the taxation on mainland China clients' overseas investment income? Thank you.

Thank you, Charles. My colleague Daniel will answer the first question, and I will ask Liv to answer the second question. Thank you.

Regarding the business of crypto, we have seen that the price has returned since the first quarter, so investors are also affected by the enthusiasm for crypto cash transactions. However, the total number of transactions of the monthly transaction amount and the monthly transaction number is still at a higher level. Since May, the price of the currency has risen, and investors have also quickly replenished their interest in the transaction. We see that the daily transaction amount has also rebounded. We continue to strengthen the professional ability of the crypto sector. Recently, we also officially launched the coin charging function in Hong Kong. This not only makes it convenient for customers to safely deposit cash, but also makes it easier to exchange assets between different financial products. After the launch of this feature, there was a lot of reaction in the coin circle. We also received a lot of positive customer feedback. We also plan to launch the coin offering function soon. In addition, in Hong Kong, we also launched the function of simulation trading crypto, which is the first Hong Kong-based multi-currency supporting simulation trading. This helps new customers to familiarize themselves with the trading rules, understand the market fluctuations and various operating processes, and complete the transition from simulation to real-time trading. A few days ago, in most of the US market, Huidu launched a multi-currency trading. Currently, it supports more than 30 mainstream multi-currency cash transactions. We will observe the transaction status of the customers online to optimize the product. We expect to gradually expand the B-group of transactions in the future. In the long term, we are full of confidence in the mainstreamization of encrypted currency. Currently, the take rate of customers trading encrypted currency cash assets on the platform will also be higher than cash equities. In the future, as the attitude and policy regulations are more and more clear, the type and transaction functions of encrypted currency products will also continue to expand. we will have more ways to discuss this. We believe that crypto has a great potential to grow, whether from assets or income. We have just started here. We are also paying attention to the new rules and policies of stable currency. Tianxin Bank, which is a shareholder of Futu, is also involved in the settlement of stable currency. We are exploring the direction of stable currency decoupling. So the crypto prices experienced some pullback since the first quarter. That affected the enthusiasm of the crypto investors on our platform. But the monthly trading volume and the number of crypto traders stayed at a pretty high level. And since May, the crypto prices rebounded, and we've seen investors quickly picked up interest in crypto trading, and we also saw a rebound in daily trading volume. We'll continue to build crypto-related product capabilities. Recently, we launched the crypto deposit functionalities in Hong Kong, which made it easier for our clients to seamlessly deposit the crypto onto Futu's platform and make it easy to switch between different asset classes. So after we launched this function, we got very good feedback from the Web3 community and also very positive feedback from our clients. And we plan to launch crypto withdrawal functions very soon. We also launched the crypto paper trading function in Hong Kong, and we're the first regulated crypto platform to allow for paper trading, which really helps the newbie investors to familiarize themselves with the trading rules and the trading procedures, especially during market volatility. A couple of days ago, we launched crypto trading on a grayscale basis in most of the states in the United States, and we now support over 30 mainstream cryptocurrency trading. We'll closely monitor our clients' trading behaviors to iterate on our product, and we plan to increase the number of cryptocurrencies in the near future. So from a long-term perspective, we are very bullish about virtual assets as an asset class. And for FUTU, the take rate for crypto trading is higher than cash equities. And we believe that as the regulatory landscape and the regulatory guidelines become more clear, there will be more cryptocurrency allowed and more functions allowed, which will bring FUTU more ways to monetize from this asset class. And we believe that whether it's from an AUM or revenue perspective, crypto has so much potential, and we're still in the very, very early innings. And in terms of stablecoins, we're aware of the relevant regulations being released recently. And Airstar Bank, invested by FUTU, participates in the stablecoin sandbox, and exploring ways to do stablecoin custody. Thank you.

For the second question, there are already many countries in the world that have joined the CIS system. The CIS rules are long-term effective and widely applicable to all 10 financial institutions, including banks, insurance companies, and securities companies. Its rules are clear and implementable. Although the U.S. has not joined the CIS, Also, through Sanka and other related agreements and channels, and the major global markets, we have established an exchange mechanism for tax information. Just like all Hong Kong's direct card issuance, if there is no requirement from the Hong Kong Regulatory Commission, and it does not comply with the Hong Kong-related law, It is absolutely impossible to disclose customer information to any third party. Recently, we have seen on the Internet that some customer information and transaction information has been disclosed to a certain third party. That is not true, it is a rumor. We also strictly follow the requirements of supervision and through this systematic common sense and professional interpretation, Now many countries in the world have participated in this common reporting system.

And for the countries that participated in the common reporting system, the CRS rules apply to all of the licensed financial institutions. whether it's banks or insurance companies or brokers, and there is a very clear set of rules that is executed consistently across different financial intermediaries. And although the United States is not part of CRS, it has its own FATCA system, which established this tax information exchange mechanism with most of the mainstream countries in the world. And as all of the other licensed brokers in Hong Kong, without the explicit request from the Hong Kong SFC, and if it's not compliant with the relevant laws and regulations of Hong Kong, Futu Securities will not disclose client information and client data to any third parties. So we've noticed that on the internet, there have been some rumors about Futu disclosing client data and client trading information to third parties, and we want to We want to make sure that everyone knows that these are very baseless rumors. And we always adhere to regulatory requirements. And we want our clients to also correctly understand and interpret these laws and regulations. So we've actually done a lot of education in this area as well. And so far, we have not seen this leading to meaningful client attrition and asset outflow. Thank you.

Thank you for the questions. One moment for the next question.

Our next question comes from the line of Emma Xu of Bank of America Securities. Please go ahead.

谢谢给我这个提问的机会。 恭喜公司再次取得非常优秀的业绩。 那我这里有一个关于hypo的问题, 就是近期hypo大跌, 这会如何影响到你们的净利息收入? So congratulations on another quarter of outstanding performance. I have a question regarding Hibo. Recently, Hibo dropped sharply. How will this impact your net interest income? Meanwhile, with Hibo falling, are we seeing changes in client behavior, such as increased fund deposits? and more allocation to money market file, equity asset, or more active trading? Thank you.

Okay, thank you, Emma. Let me answer this question. We also shared with you in the last conference, if we use a static analysis, let's say the market's interest rate drops by 25 points every month, we will have a monthly interest rate. about 8 million to 10 million Hong Kong dollars. In fact, after the actual decline of 50 points from the US Federal Reserve last year, we actually saw that the interest rate income of this interest rate is still maintaining a certain growth in the first quarter. Because of the increase in the size of the entire client's cash assets, it actually minimizes the decline to a considerable extent, which has such a drag on the income. At the same time, we also see, like Emma mentioned, the recent drop in the hypo interest rate, which leads to the activity of our entire customer transaction, including the exchange rate of our entire customer and the income from our transaction. We all see an opportunity to rise in this. On the other hand, we believe that the rapid drop in the hypo interest rate It also has something to do with some of the larger Hong Kong IPOs. So we still need time to see if Hypo can maintain such a low level. Let me translate this. In our last earning call, actually, we provided a sensitivity analysis. Assume every 25 basis rate cut, our monthly pre-tax profit will be down 8 to 10 million Hong Kong dollars, roughly. But since the Fed rate cut last year by 50 basis points, we see the overall interest income revenues in the first quarters continue to grow on a Q-on-Q basis, which is mainly because the average size of our idle cash balance largely offset the rate cut implications. At the same time, as you mentioned, the recent declines in HIBOS, which will trigger more clients' trading activities in terms of velocity, and consequently, we will benefit from the trading commissions. On the other hand, we think the recent sharp declines by HIBOS may be just temporary, partially due to certain mega-IPOs in Hong Kong. So whether it will be sustained at such a low level, it is few way to see. Thank you.

Thank you for the questions. One moment for the next question.

Our next question comes from the large. So you're one from Morgan Stanley. Please go ahead.

Okay. Thank you, Mr. Guan, for giving me the opportunity to ask a question. I'm Huang Chi Yao from Morgan Stanley. I have two questions I'd like to ask. The first one is about the size of the deposit. It has reached the highest level in history. I would like to ask about the distribution of the deposit in different areas. Especially, how much is the contribution of the deposit from outside of the Chinese region? If we look at the whole year, I would like to ask about the position of the contribution of the deposit outside of the Chinese region. The second question is that since the launch of a series of AI-related products at the end of March, So my first question is on the client-asset inflow that is hitting a record high this quarter. And so just wondering the mix of the inflows by different regions, especially from the non-quitter China, region contribution, and what's the outlook for the full year? And second question is about, is there any quantitative metrics that we can look at to measure the adoptance or engagement satisfaction and client stickiness arising from the AI tools that we have launched? And what could potentially be done more in this space? Thank you.

Let me answer the first question. For the second question, I will ask Daniel to answer it. In the first quarter, all of the seven market entries actually continued a relatively strong growth trend. In other words, the overall entry rate of the entire group increased by more than 50%. Just like what Liv said at the beginning, it is also the highest entry rate in the single quarter since we started. In this quarter, although the stock market is fluctuating, the Hong Kong market has a better performance, and the US market has a bigger fluctuation. So overall, with these two markets, the market-to-market impact, Hong Kong and U.S. stocks are basically down. So most of the increase in asset size in this quarter is from the entry level of our customers. In terms of the first quarter asset inflows, actually we see a very strong inflow momentum across our seven different markets. The overall asset inflow by the group increased over 50% queue-on-queue basis. And also, as Liv mentioned in the opening remarks, it is our record high in single quarter numbers. In terms of the geographic breakdowns, Hong Kong and Singapore still are the majority contributor markets for the asset inflows. And going forward, we are constructively positive on the overall, on the full-year asset inflow situation. Thank you.

Hello, I would like to introduce the situation of NiuNiu AI. The AI function of NiuNiu has been on the line for more than a month, so the time is not very long, and we will continue to observe a lot of data. But at present, we think that the customer is very satisfied with the feedback and satisfaction of our AI function. We also see that it promotes the activity of the customer. In addition, we also put NiuNiu AI into our member system in Hong Kong. So we've launched the FUTUBLE AI functions for about two months now, so it's not been that long. We're still analyzing more data, but based on the preliminary numbers we have seen, Our users have very good feedback of our F2PO AI function, and that also leads to more engagement and activity on our platform. We've also packaged our AI functions into our membership programs. So there's a limited number of free questions you could ask to AI, and that depends on the tier of your membership, and that is based on the client assets and the trading behavior on our platform, which means that the AI function has helped with net asset inflow and the trading velocity. I think that's why we're trying to roll out AI functions to more international markets based on the initial traction we have seen of our Hong Kong clients.

Thank you.

Thank you for the questions. One moment for the next question. Next question comes from Yufran of CICC.

Please go ahead.

Hello, thank you for giving me the opportunity to ask this question. I am Fan You, an analyst at Zhongjin. I have two questions to ask. First, about the cost of goods. In the first quarter, there was a significant decline compared to the previous year. It is much better than the previous year. Besides the active market and the rapid growth of new users, are there any other reasons? In addition, is there any update on the cost of goods this year? This is the first question. The second question is, we have recently seen that we have officially entered the New Zealand market. We would like to ask the company to share with us about New Zealand itself, its space, layout, and some user images, etc. These are the two questions on my side, and I will translate them. This is Yoyo Fan from CICC, and I have two questions here. The first one is about the customer acquisition cost of the CICC. We see it decline much in this culture. So what's the reason behind? And do you have any new guidance for the future of CAC? And the second question is that we see we have announced to entry the New Zealand market. Would you please show more color on this market?

Thank you, Fan You.

I will answer your first question. For the second question, I will ask my colleague Robin to answer it. In the first quarter, our entire customer base is at a relatively low level, about 1,800 Hong Kong dollars per new customer. This is mainly because different markets in the first quarter have presented some relatively rich investment opportunities, such as a comprehensive rise in Chinese assets and the IPO market. There is a significant increase in activity and a gradual fluctuation in the U.S. stock market. These have greatly improved the investors' moods. Our market team also grasped the window very well, and increased the strength of the corresponding investment. In addition, the influence of brand performance has obtained a very good market performance. In the future, we expect that in different markets, no matter what the market situation is, we will still maintain a certain level of investment. On the one hand, we still prioritize customer growth. On the other hand, we also hope to continue to do some long-term brand construction. From the perspective of long-term development, It helps us to improve our brand's ability to fight against the cycle, so that we can maintain a growth pattern in the cycle fluctuation of the market. However, due to the uncertainty of the short-term market situation, the effect of these brand's goods and services is not yet completely certain. At the same time, the overall red-line market, including the capital market, has some major fluctuations this year. From a auditory perspective, we will maintain the same value-added year-on-year goods cost. We will re-evaluate the data here in the next one to two seasons based on the actual situation. In terms of the CAG, in the first quarters, the average CAG we reached in the first quarter is around HK$1,800, which is relatively lower than our objectives in the beginning of this year, partially due to very strong market tailwinds we got regardless in China, the China assets re-rating, very strong IPO markets in Hong Kong and volatilities in the US. And in these trading windows, our marketing colleagues, time they catch these windows, and thanks to our brand equities influence as well, we got a very good result. Going forward, we do expect, we will continue to set client growth as our first priority. At the same time, we will further emphasize our brand building deployment in terms of the fundings. So in the long run, we think, you know, the further incomes of the brand equity will, you know, let us become more resilient in different trading investment cycles. So the investment on this brand equity, the effect in the near term, it is very difficult to predict, not to mention the overall market environment and the market environment is to include a lot of uncertainties. So from the prudence angles, we will maintain our full year guidance on CAC unchanged, but we will revisit this assumption in the coming quarters.

Thank you. Let me answer the second question about New Zealand.

First of all, the first point is that Moomoo is the second place in the market from the perspective of DAO in Australia. That is also due to this brand's We entered New Zealand as a natural extension. Secondly, according to our survey results, the highest range of New Zealand investors' attention, such as US stocks and Australian stocks, we already have very mature product capabilities that can be directly used. Entering the New Zealand market, there will not be too many extra license plates, personnel, and research and development investments. At the same time, we can also use Moomoo is now the number two broker in Australia in terms of BAU.

And we've accumulated a lot of brand equity, and we feel like expanding into New Zealand was a natural extension. And we've also seen that, you know, Australian stocks and U.S. stocks are the two most popular asset classes for Kiwi investors. And we have already built very strong product capabilities for these two products in Australia. So expanding to New Zealand will not incur much investment in terms of, you know, licensing or personnel or R&D. and we can largely replicate the IT infrastructure and the marketing resources and the brand equity with BILT and Australia. So the incremental cost will be quite manageable, and we think the New Zealand business will present very favorable ROI. Thank you.

Thank you for the question.

One moment for the next question. The next question comes from Peter Chang from J.P. Morgan. Please go ahead.

Thank you, Manager Chen, for giving me the opportunity to ask questions. Congratulations on your very good performance. I have two questions here. One is that we observed that the effect tax rate has risen this quarter. We would like to ask the reasons behind this, and in the long term, do you think our management I should be the shaping that I should go some much and do the way you go to see how can you can you try and bomb a job when you have a man who should be and they can make some theory the way I should see what we're going to do that I did do to you guys should Thanks for giving me the opportunity to ask questions. This is Peter Zhang from J.P. Morgan. I have two questions. First is about the affected tax rate. We noticed that the affected tax rate picked up in the first quarter to 18%. We're wondering what's the reason behind and what's the medium to long-term effective tax rate level for FUTU going forward. Second question is about the blended commission fee rate. We noticed that in first quarter, blended commission fee rate stabilized and picked up slightly. We wish to understand the reason behind and what will be the trend going forward. Thank you.

Peter, thank you. Let me answer these two questions. First, the effective tax rate for this quarter has reached 18%. There are two main reasons for this. One is that as the profits of our overseas companies improve, some of the historical tax credits in some regions have been used up. So this will cause an increase in the effective tax rate of the entire group. Secondly, with the double-digit tax system implemented by the global financial institutions in more and more countries, the overall tax rate of our cross-region market businesses will go up. I expect that in the next few months, our overall company's effective tax rate will be around 17% to 18% or so. In terms of the effect tax rate in the first quarters, this quarter our effect tax rate is around 18.6%. There are two reasons behind that. One is more and more our overseas markets start to generate profit. The historical accumulated tax credit has been fully utilized, which will consequently enhance our overall group effect tax rate. Secondly, after the implementation of Pillar 2 by OECD in different markets and the different countries, our overall effect tax rate will be impacted to some extent as well. So I would expect our overall effect tax rate will maintain 17% to 18% in the coming quarters. 第二个问题是有关综合佣金率的。 本季度的一个综合佣金率相比上一个季度是有一个小幅的提升。 主要还是因为整体的市场的客户的市场交易的品类, product mix的一些change。 Then for the second question regarding the blender commission rate changes, actually there's a slightly uptake on a Q and Q basis in terms of the blender commission rate. The reason behind that is mainly due to the product mix change. There's more clients trading on certain derivatives, such as, you know, U.S. options, et cetera. Going forward, as we will launch more new products, for instance, the crypto trading, et cetera, I do expect that our overall blended commission rate will maintain stable. Thank you.

Thank you for the questions. One moment for the next question.

Our next question comes from Alan Wang from Citi.

Please go ahead. Thank you very much for giving me this opportunity. I have two small questions to ask. The first is about the Hong Kong market. We had a market share target of about 40%. We hope that the number of customers entering Hong Kong will exceed 1 million. If we look at the first quarter, the number of customers entering Hong Kong is close to 900,000. If we look at it at this pace, our long-term goal in the coming quarter by the end of the year. We don't know how the company will look at the Hong Kong market in the future. And considering that there are some changes in the overall situation, such as ants and Robinhood, which are also going to come to Asia, I don't know how much we can improve in terms of the market share. That's the first question. The second question is about interest rates. We saw that our IDC balance increased very quickly in the first quarter. I'd like to ask how much interest rates 大概現在有多少是 idle cash 這邊貢獻的 然後 idle cash stream 裡面大概有多少是 港幣的 idle cash 就這兩個小問題 我很快翻譯一下 Thanks management for giving me the chance to ask a question This is Alan from Citibank My first question is on Hong Kong markets So FUTU previously has a market share target of about 40% in Hong Kong That basically implies about 1 million paying customers in Hong Kong. So judging from our 1Q numbers, our paying customer numbers is already approaching close to around $900K. And given the pace of our new paying customer acquisition in Hong Kong is so fast, we think our long-term goal of market share of 40% in Hong Kong is probably within reach within the next couple of quarters. So against this backdrop, wondering if management could share your updated view on the Hong Kong markets, especially considering that there's recent changes in the competitive landscapes with potential competition for Ant Group and Robinhood. If we look beyond the 40% market share, how much additional headroom do we see to further increase market share in Hong Kong? The second question is on interest income. We see that the IDO cash balance has grown very notably during the first quarter. wondering if management could help us break down the interest income, how much of that is coming from EIDL cash, and how much of that is from margin finances, equity lending, et cetera.

Thank you, Alan.

Let me answer the second question about Idlecash. The first question is for my colleague Daniel. Overall, Idlecash's interest income this quarter is about 35% to 40% of the total interest income generated by Idlecash. As you mentioned, the interest rate has increased relatively quickly in this quarter. I think there are several reasons behind it. On the one hand, the growth of our customers is still very strong, including the revenue of our customers. On the other hand, because the market is relatively fluctuating in the first quarter, we have a lot of customers who have increased their share of cash in the market compared to the previous quarter. These two are the main reasons. For the second question regarding the idle cash, roughly the idle cash related income accounts for 35% to 40% of our total interest income for this quarter. The very strong, robust increase in the revenue arising from idle cash partially due to two reasons. Number one is we got a very strong net asset inflows from existing clients, not to mention A lot of new clients we acquire in the first quarter. Secondly, it's due to the market was quite volatile in the first quarter. So in our observation, a lot of clients actually, you know, partially inclined to increase their cash position and lower their stock positions. So which is, you know, we got some benefit arising from that as well. Thank you. Over to you. Thank you.

In terms of the Hong Kong market, Alan, you just mentioned that the absolute value of the number of real estate customers is actually the number of our Chinese customers. And then you mentioned that the market rate goal is our market rate goal for the local market in Hong Kong. So these two numbers are not a comparison between Apple and Apple. In fact, in the past two seasons, last year's fourth season and this year's first season, Hong Kong is the market with the most real estate customers in our seven markets. In fact, we think that in the case of a good market, The leading Internet business has a great opportunity to continue to increase market share. I think the growth of Hong Kong in the past two seasons has also given us confidence to achieve more than our previous market share target. We feel that from the perspective of customer numbers and customer assets, Hong Kong has a great room for growth and prospects. In fact, the Hong Kong market has never lacked competition. In the past few years, many well-known friends have entered the Hong Kong market. No matter how the market environment and pattern change, in fact, we have always been doing product innovation and support. We have also built a very time-consuming competition model and mutual support around many of the dimensions. We have also released a lot of innovative customized product functions and features for local investors. Combining our very good user experience and a lower pricing strategy, we are continuing to challenge users in the local market, including increasing the market share. We think that brands are also the most important intangible assets of the financial platform. The impact of the brand is not one-off. It needs to last for a long time. Fudu has established a very high level of trust between users. Users are very close to our platform. So we think that any new brokerage company, if it cannot provide very differentiated products and breakthrough services, it is very difficult to change the choice of users. As our brand strength continues to strengthen, we have also gained more and more high-end customers' affection. The scale of these high-end customers The quality of our customers is also constantly improving. We observed that the customer's choice of persuasion is usually multi-dimensional. Whether it is to adopt a zero-wage strategy or to make a flow-through platform, we don't think it can achieve the ideal transformation effect. In fact, users are more inclined to make a comprehensive comparison and choose a safe, regulatory, brand-recognition-high, comprehensive financial platform. So in terms of our Hong Kong market share, the absolute number of fund accounts you mentioned applies to a greater China business, while the market share target you mentioned was about our Hong Kong local business. So these two numbers are not apple-to-apple comparisons. In the past two quarters, we have seen the Hong Kong market contribute the highest number of paying clients among all of our seven markets. which gave us confidence that as a leading broker in Hong Kong, we'll be able to gain outside benefits from favorable market conditions. And we think that our Hong Kong business has huge runway for growth, both in terms of client numbers and client assets. And the Hong Kong market has never been short of competition. And in the past few years, there have been a number of our peers, very notable peers entering into Hong Kong. But regardless how the outside market environment changes, we've always been doing product innovation and product iteration. And we believe that our product capabilities have built a very strong barrier to entry for our business. And in each and every market we enter into, we build very customized product experience, very innovative product features. And coupled with our superior user experience and very competitive pricing strategy, we continue to gain user mind share in Hong Kong and take market share. And on top of that, we think brand is probably one of the most important intangible assets of the financial services platform. And building a brand takes time. And Futu has built a considerable level of trust with our clients. and we've seen very, very high client stickiness on our platform. It's consistently above 98, 99% on a quarterly basis. So if there is a newcomer that cannot provide highly differentiated product experience and service, we don't think it can sway the client choices. And as we continue to build our brand, we also see a higher number of high net worth clients in Hong Kong, which contributed to a very high net asset inflow quarter over quarter. And we've also seen that when the clients choose a broker, that decision is usually multidimensional. Whether it's applying a zero commission strategy or just to direct traffic from other platforms, we don't think either one is going to achieve very desirable effects. The users will choose the platforms that are compliant, that have high brand recognition, and have the strongest all-rounded capabilities. Thank you.

Thank you for the questions. Our last question comes from Zoe Zong from Jefferies. Please go ahead.

感谢管理层接受我的提问。 首先恭喜公司取得强劲的业绩。 那我这边也是有两个问题想请教一下。 首先是想跟进一个关于牛牛AI的问题。 刚刚管理层也提到二季度会在更多的海外市场推出AI产品。 想请教一下我们的AI产品战略以及这个投入规模是怎么样的。 I have two questions. Firstly, I have a follow-up question on Futubo AI. Management mentioned that more AI products will be launched in overseas markets in Q2. So wondering what's your AI product strategies and investment scale? And my second question is about VATP. Could you please share an update on the business development with your VATP license? Thank you.

Okay, so let me answer the question about the VATP, and then the first question about the AI strategy, including some of the questions that have been put in, I will ask my colleague Daniel to answer. In terms of the VATP, there are actually no major updates this quarter. At the moment, we are still in the process of applying for the VATP Phase 2 license. During the Spring Festival, we have actually been shortlisted. For VATP license, actually there's no any update in the first quarters. We got the short list by Hong Kong SFC for VATP license alongside with other couple of applicants. Now we are still in the process of phase two. There are still a lot of validations need to be conducted by the third party consultants independent consultant, and there's a lot of process testing work need to be complete in order to get the final approval from SFC. We will keep you posted for there's any progress. Thank you.

In terms of our AI strategy, Futu has now built its own AI team. We also pay close attention to the development of AI in this industry to do the same for the replacement and evolution. AI and Futu's applications are divided into two parts. One part is the internal application to improve the efficiency of the business. On the outside, it is to develop more of these product functions that can serve our customers well. In terms of internal promotion, AI has been widely used in many business segments. such as customer service, account verification, and so on, we have seen a significant improvement in the AI performance. In terms of customer service, we think that for active investors on our platform, AI is a very important help or function to reduce the threshold of their investment, so that they can get this information more efficiently, and then form this investment strategy. We are developing some new functions, which are expected to be online in the future. For example, Algo Trading is generally only known to institutional investors. Through NiuNiu AI, users can tell the AI what parameters they want to set and what conditions they want to implement. Our system can help it to write algorithm for algo trading. In terms of our AI strategy, Futu has assembled our own AI team. We're closely monitoring the industry development and keeping up with innovations. So the AI is applied in two ways. One, internally, we use that to increase operating efficiency, and we also leverage AI to develop new products and features for our clients. And in terms of operation efficiency, we've already leveraged AI in a number of scenarios, including customer services, the account opening documentation verification processes, And we've seen AI bringing tangible uplift to our operating efficiency. And in terms of our client-facing features, we think that for active traders, a key benefit of AI would be to lower the investment threshold and help them more efficiently gather information to make informed investment decisions. For example, we'll launch Elgo trading very soon. So before, Elgo trading is almost exclusively for the sophisticated institutional investors, and now for retail clients, by telling AI the stock you are interested in, the parameters you want to monitor, and what kind of conditions will trigger trade, our AI can generate an Elgo trading function for our clients, which we think significantly lower their barrier. So we're around that goal, and we'll continue to innovate to bring more AI-powered features. Thank you.

Thank you for the questions. With that, I would like to hand the call back to Mr. Daniel Yuan for closing.

That concludes our call today. On behalf of the FUTU management team, I would like to thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you, and goodbye.

Welcome to today's conference call. Thank you for your participation in our discussion.