Futu Holdings Limited

Hello, ladies and gentlemen. Welcome to Futu Holdings' first quarter 2026 earnings conference call. At this time, all participants are in a 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, Alan Toy, Investor Relations Manager at Futu. Please go ahead, sir.

Thanks, Arbiter. Thank you for joining us today to discuss our first quarter 2026 earnings results. Joining on the call today are Mr. Lee Lee, Chairman and Chief Executive Officer, Arthur Chen, Chief Financial Officer, and Robin Xu, Senior Vice President. As a reminder, today's call may include forward-looking statements, which represent the company's beliefs regarding future events, which by their nature are not certain and are outside of the company's control. forward-looking statements involving heavy risks and uncertainties. We caution you that a number of important factors will cause actual results to differ materially from those contained in any forward-looking statement. For more information about potential risks and uncertainties, please refer to the company's guidance with the SEC, including its annual report. With that, I will now turn the call over to Liv. Liv will make his comments in Chinese, and I will translate.

Thank you for attending today's conference. In the first quarter, there were 22.5 million competitors with assets. The total number of customers with assets reached 3.59 million, which increased by 34% compared to 7%. In the first quarter, Hong Kong shares were depressed. The Hong Kong market had a slowdown, but it still contributed to the second quarter of competitors with assets. Thank you all for joining our earnings call today.

In the first quarter, we added 225,000 net new funding accounts, bringing our student funding accounts to 3.59 million. of 34% year-over-year and 7% quarter-over-quarter. Although subdued Hong Kong equity market with our client acquisition, Hong Kong still contributed to second largest new account addition among all regions. We remain confident about sustained client growth in Hong Kong. Looking ahead, we will focus more on the growth of client assets and lifetime value. leveraging our strength in product innovation, brand trust, and a one-stop platform to further unlock the commercial potential of the focal market.

Singapore's market has achieved double-digit growth compared to its previous two-digit growth. In the past three years, Singapore's household assets have maintained a growth of more than 50% over the years. Considering the local customer and human resources level, we believe that Singapore's customer assets growth space is still wide. The Malaysian market Singapore delivered double digit sequential growth

in net new funding accounts. Over the past three years, average client assets in Singapore grew at a CAGR of more than 50%. Given the wealth profile of local residents, we continue to see significant room for further asset growth in Singapore. Malaysia led all markets in client addition for another quarter, thanks to our effective marketing initiatives around U.S. equities as well as MUMU's strong IPO product capability, which allowed us to capitalize on the active Malaysian IPO window for accelerated client growth. Meanwhile, profitability in Malaysia continues to improve, and we expect the market to achieve break-even within the next 6 to 12 months.

In Japan, MUMU's outstanding U.S. stock trading capacity continues to drive customer growth. In the first quarter, the U.S. stock trading volume in the Japanese market to achieve double-digit balance increase, and double the share price of each stock. This year, we will continue to optimize the day-to-day trading experience to better meet the localized investment needs and further open up the customer growth space. In the U.S., we have officially obtained NFA approval to carry out predicted market economy business and will soon provide local investors with world contract transactions including sports, competitions, etc. and further strengthen the attractiveness of active traders.

In Japan, our superior U.S. equity trading capability continues to drive client acquisition. In the first quarter, U.S. stock trading volume in Japan recorded double-digit sequential growth, while U.S. options contract volume doubled. This year, we will continue to enhance our Japanese equity trading experience to better meet domestic investment needs and further unlock client acquisition potential. In the U.S., we officially received an IFA approval to operate a prediction market brokerage business, and will soon begin offering event contracts, including sports-related products, to local investors, for the strengthening Moomoo's value proposition to active traders.

Due to the rise in the market share of expensive metals and geopolitical markets, the customer market has become increasingly enthusiastic, and has reached a record high of the second-highest in history. However, the decline in the stock market has caused obvious deterioration of the customer's assets, The default customer asset ratio is 47% higher than the basic market share. Customer assets in Japan, Australia, and the Canadian market have achieved double-digit ratio growth. Local household assets have also created historical growth. Customer quality has steadily improved. As the risk of investors rises, the default financing and financing balance will increase by 8% to 7.29 billion dollars.

Client engagement strengthened on the back of precious metal market volatility and geopolitical tensions, leading to the second-highest quarterly net asset inflow on record. However, March market losses in client equity holdings exerted a substantial negative impact. To the client asset, we moved flat quarter-over-quarter, yet up 47% year-over-year. Client asset registered double-digit sequential growth in Japan, Australia, and Canada, and the average client stack across the three regions also reached all-time highs, and it's growing improving client quality. Rising with IP tie drew margin financing and security lending balance up 8% sequentially to HK$72.9 billion at quarter end.

The total trading volume record for the re-branding platform reached 4.15 billion Hong Kong dollars. The same rate increased by 29% and the same rate increased by 4%. U.S. stock trading volume remains stable at 3 trillion Hong Kong dollars. AI is still the main topic of U.S. stock investment, but customer interest is gradually falling along the AI industry chain, extending from the chip layer to the base facilities. In terms of Hong Kong stock, the market fluctuates, and customers enter the market at the bottom, driving Hong Kong stock trading volume to rise by 22% to 1 trillion Hong Kong dollars. China's technology,

to the trading volume reached a record 4.15 trillion Hong Kong dollars at 29% year-over-year and 4% quarter-over-quarter. US stock trading volume remained broadly stable at 3 trillion Hong Kong dollars. AI continues to be the dominant investment team with client interest gradually shifting down the value chain from semiconductor names towards AI infrastructure beneficiaries. Hong Kong stock trading volume rose 22% sequentially to 1 trillion Hong Kong dollars, as heightened market volatility drove stronger bottom fishing activity. Active trading in China technology and newly listed AI research companies more than compensated for softer momentum in the consumer sector.

The R&D Center officially approved the second stage of the VATP ranking of the Hong Kong Stock Exchange and fully implemented it. At present, a part of the virtual asset transaction volume, or AUM, has been moved to the R&D Center. In the future, we plan to launch a virtual asset service for stock financing in Hong Kong to further improve the efficiency of cross-border funds. At the same time, we will continue to promote OTC transactions In March, PandaTrade officially obtained second-phase approval for the Hong Kong SFC VATP license and commenced full operations.

Since launch, a portion of Fuji Securities' crypto trading volume and AUM has migrated to PandaTrade. Looking ahead, we plan to introduce security-backed margin financing for virtual assets in Hong Kong to further enhance capital efficiency across asset classes. At the same time, we will continue to expand the capability of our crypto exchange, including OECD trading, broader token support, and staking services. We are also actively exploring new institutional service use cases with the goal of making PanzaTrade a key infrastructure

within the Hong Kong VAT3 ecosystem. We have further expanded the selection of fund products. In Hong Kong, we have become one of the first to launch a stock market for the space economy theme public fund. In Singapore, we have launched a local stock fund under the development plan of the Singapore Monetary Authority's stock market. In addition, we have also launched a structural bidder bureau for gold and oil, and further expanded the cooperation of issuers. In the quarter, we have sold a number of structured product acquisition customers, 1% space.

Herein well-spent client assets were 178.4 billion Hong Kong dollars, up 28% year-over-year and broadly stable quarter-over-quarter. In the first quarter, client asset allocation partly rotated from money market funds into equity funds, improving risk appetite. In response to evolving client demand, we further expanded our fund selection. In Hong Kong, we became one of the first brokers to offer space-economic-themed mutual funds. While in Singapore, we drew out local equity funds under the MAS Equity Market Development Program. We also launched gold and oil-linked structure nodes and onboarded new issuers. Two-to-retail subscribers for structure products doubled sequentially.

At the end of the year, our ICO share of GII customers reached 625, which is the same as the growth of 26%. As of quarter end,

we serve 625 IPO distributions and IR clients, up 26% year-over-year. In the first quarter, 12 IPOs each saw over HK$100 billion in subscriptions among our platform. Well, six issuers appointed us as overall coordinators for their Hong Kong listings, and are scoring our strong distribution and underwriting capability. During the quarter, we also act as joint bookrunners for several prominent Hong Kong IPOs, including those of Zhifu AI, Minimax, and Viren Technology. Next, I'd like to invite our CFO Arthur to discuss our financial performance. Thank you, Liv and Alan.

Please allow me to walk you through our financial performance in the first quarter. All the numbers are in Hong Kong dollars unless otherwise noted. Total revenue was $5.9 billion, up 25% from $4.7 billion in the first quarter of 2025. Vocation commission and handling charge income was $2.6 billion, up 14% year-over-year and down 5% year-over-year. Total trading volume grew on both year-over-year and year-over-year basis, while blended commission rates declined due to stronger trading activities and higher price for U.S. stocks and options during the quarter. Interest income was $2.7 billion, up 28% year-over-year and down 13% year-over-year. The year-over-year increase was mainly driven by high interest income from margin financing and the bank deposits, while the QOQ decrease was primarily attributable to lower interest income from security borrowing and the lending business, as well as bank deposits. Other income was $564 million of 80% year-over-year and the down 10% QOQ. The year-over-year increase was primarily driven by higher currency exchange service income and IPO subscription service charge income. The QVQ decrease was mainly due to lower enterprises public relationship service charge income and IPO subscription service charge income. Our total cost was $749 million less compared to the first quarter of 2025. Brokerage commission and the handling charge expenses were $164 million of 15% year-over-year and 16% QVQ. The year-over-year increase was broadly in line with the growth of our brokerage commission and handling charge income. The Q over Q increase was mainly due to transaction fees rebate in the prior quarters. Interest expenses were $415 million, down 12% year-over-year and a 5% Q over Q. Both the year-over-year and the Q over Q decrease was mainly driven by lower interest expenses associated with our security borrowing and lending business. Processing and service costs or $117 million of 25% year-over-year and 13% Q-over-Q. Both year-over-year and Q-over-Q increase was primarily driven by higher private service fees. As a result, total gross profit was $5.1 billion, an increase of 29% from $3.9 billion in the first quarter of 2025. Gross margin was 87.2% as compared to 84% in the first quarter of 2025. Operating expenses were $1.6 billion of 25% year-over-year and a flat Q over Q. R&D expenses were $479 million of 24% year-over-year and down 5% Q over Q. The year-over-year increase was primarily driven by higher R&D headcount to support strategic initiatives and the new markets. Selling and the marketing expenses were $557 million of 21% year-over-year and a 10% Q over Q. Both the year-over-year and the Q-over-Q increase was mainly driven by higher customer acquisition costs. G&A expenses was $541 million of 30% year-over-year and a flat Q-over-Q. The year-over-year increase was primarily due to increase in G&A personnel. As a result, income from operation was $3.5 billion of 31% year-over-year and down 15% Q-over-Q. Operating margin increased to 30.3% from 57.2% in the first quarter of 2025, mostly due to strong top-line growth and operating leverage. On May 22nd, 2026, the company received an administrative penalty reprint notification letter from the China Security Regulatory Commission, Shenzhen Bureau. in an aggregate amount of approximately RMB 1.85 billion, which has been fully reflected in our first quarter financial statements as an adjusted subsequent event in the U.S. gap. This amount does not impact our business fundamentals or financial stability. We remain focused on long-term growth across international markets. As a result, our net income decreased by 61% year-over-year and 75% QVQ to $831 million, with net income margin at 14.2%. Prior to giving effect to this adjustment, our net income would have increased by 36% year-over-year and down 13% QVQ to $2.9 billion, with net income margin at 49.9%. As of the close of the U.S. market on May 27, 2026, we have accumulatively repurchased approximately U.S. dollars $418 million worth of ADS, reflecting management's strong confidence in the company's future growth prospects and a commitment to deliver shareholder value. Subject to market conditions, we may continue to execute repurchase from time to time and the US dollar 800 million share repurchase program announced in November 2025. That concludes our prepared remarks. We now like to open the call to questions. Operator, please go ahead.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile our Q&A roster. And our first question is going to come from the line of UCN with CICC. Your line is open. Please go ahead.

Thank you for giving me the opportunity to ask this question. I'm Yoyo, an analyst at Zhongjing. I have two questions for you. First of all, the first one is about supervision. I would like to ask the company to explain to us about the latest supervision guidance for the cross-border securities exchange fund. How does the company understand the latest supervision requirements this time? From the company's point of view, what impact does it have on us? For the second question, I would like to ask about the distribution of the region. Could you please help us to analyze the number of new real estate clients in the first quarter, including the number of real estate clients in the first quarter? It is distributed in a region in each market. And then, if we look at the end of the first quarter, how is our customer AUM distributed in each market? I will quickly translate it here. Thanks, management, for taking my call. This is Yoyo Sun from CICC. I have two questions here. The first one is about the regulation. Would you please share more on your understanding of the latest regulatory requirements published by CSRC and SFC last Friday, and what's the impact on FUTU? The second quatering is about our regional breakdown. Would you please share more data on the regional breakdown of the net new added paying clients, the existing paying clients in Q1, and also the AUM breakdown by regions as of Q1? These are my two quaterings. Thank you.

Thank you, Youyou. Let me answer the first question.

Hello, Youyou. Let me answer the first question. CSRC and FSD released on Friday about the industry-based guidance update of the cross-border securities and fund business of domestic investors. We first pay attention to it and respond actively. So this time, the regulation adjustment is in line with the unified requirements of the entire industry. The company will actively embrace supervision and strictly follow the guidance to steadily advance the follow-up meeting work. So as a strong financial institution, Fudu has always put the regulatory business in the first place. Before this, we have completely stopped opening up for domestic customers and continue to strengthen the inspection and counter-corruption mechanism of opening up. We have been holding back on fraud. In the past two years, we have accumulated tens of thousands of non-regulatory opening up applications. Until the end of the first quarter, domestic self-employed customers is about 13%, while customer assets account for about 17%. The corresponding income contribution is about 20%. And domestic customers' two-year intensive care period does not require a withdrawal account, but is limited to domestic income and purchase behavior. The shortage of business has also diversified in the past few years. At present, in the face of local customers in Hong Kong, We still maintain a market share of more than 50% in the market environment of fierce competition. At the same time, the company's internationalization has also entered a full-scale acceleration period. In the first quarter, overseas independent brand MuMu gained a high rate of annual income growth in all overseas markets. The income growth of five countries exceeded 100%. There are more than 2 million overseas asset customers. Customer quality is increasing year by year. The average AOM is about $18,000, which is significantly higher than other online investment platforms in the region. Future companies are expected to enter more international markets. At present, the monitoring and photographing process is progressing smoothly. We are also continuously advancing the preparation work for the early stage. We believe that the global layout will further improve the resilience and future growth of the group's business structure. Overall, the company's business operations in Hong Kong and overseas markets are all normal. Each new business is also in the process of promotion. We expect that this monitoring update will not have a real impact on the 800,000 customers per year. We will continue to adhere to the harmonious business and internationalization strategy, and continue to improve product and service capabilities to promote the company's long-term stable growth. Thank you.

CSRC and SFC released updated industry-wide regulatory updates last Friday regarding cross-border securities futures and fund-related activities involving mainland Chinese investors. We paid close attention to the updates immediately and responded proactively. These regulatory adjustments apply uniformly across the industry. and the company will continue to actively embrace regulatory requirements and stepping along subsequent compliance matters in strict accordance with the guidance. As a licensed financial institute, Futu has always placed compliance operations as its top priority. Previously, we had already fully seized account opening for mainland Chinese identity holders. while continuously strengthening our account review and anti-fraud mechanism. We maintain zero tolerance towards fraudulent activity. And over the past two years, we have cumulatively rejected tens of thousands of non-compliant account opening applications. As of the end of the first quarter, Mainland China funding accounts represent approximately 13% of our Q2 funding accounts. Well, related client assets accounted for around 17% of Tutu client assets, contributing approximately 20% of Tutu revenue. In addition, the two-year rectification period of mainland Chinese clients does not require false account closure, but rather restrictions on deposit and security buying activities, where clients are physically located within mainland China. Over the past several years, Fuzhou's business has also become increasingly diversified. In Hong Kong, despite the intense competitive market environment, we have maintained a market share of over 50% among local residents. Meanwhile, the company's international expansion has entered a phase of full acceleration. In the first quarter, Mumu, our overseas independent brand, delivered strong year-over-year revenue growth across all overseas markets, with revenues in five countries more than doubling. Overseas funded accounts surpassed 2 million, while client quality continued to improve steadily, with average AUM per client reaching approximately $18,000, significantly higher than that of other local online investment platforms. Looking ahead, the company expects to expand into more international markets. Regulatory license applications are progressing smoothly. Well, we are also advancing related preparations in parallel. We believe our global expansion strategy will further enhance the resilience of the group's business structure and broaden its long-term growth potential. Overall, The company's operations in both Hong Kong and overseas markets remain fully normal, and various new business initiatives are progressing in an orderly manner. We do not expect this regulatory update to have any material impact on our full-year guidance of 800,000 net new funding accounts. FUTU will continue to adhere to its Comply First and international expansion strategies. will continuously enhancing its product and service capabilities to drive long-term sustainable growth.

Okay, thank you, Li. Regarding the second question, I would like to answer the question about the disengagement of competitive real estate customers. In the first quarter, Malaysia and Hong Kong, the two regions, collectively contributed more than half of our competitive real estate customers. In the rest of the market, Singapore's contribution is the largest. Malaysia and Hong Kong together contributed more than half of the net new fund accounts in the first quarter, while among the remaining markets, Singapore contributed the largest first shares. And at the end of the first quarter, over 55% of the group's fund accounts were under our overseas brand Moomoo, primarily from Singapore, US, and also the Malaysia. At the end of the first quarter, Food Security Hong Kong entity contributed the largest share of the group's total assets, Within Moomoo, total client's assets was primarily contributed by Singapore and the U.S.

Thank you. Thank you. Thank you very much.

Thank you. And one moment for our next question. Our next question comes from the line of Leon Chee with CLSA. Your line is open. Please go ahead.

Okay.

Thank you for giving me this opportunity to ask a question. I am Li Yangqi from Zhongxin Liang. I have two questions for the management team today. First, I would like to ask the management team. After the latest update of the management guidance, our company also disclosed relevant administrative punishment matters. Can you update us on the latest cooperation relationship between our company and banks and other funds providers? For example, in terms of bank receivables, financing costs, and credit rating, Thanks management for taking my questions. This is Liang Qi from CISA. I will recap my questions in English. I have two questions. My first question is on the regulatory aspect. With the recent regulatory updates as well as the administrative penalty disclosed, we would like to understand your latest cooperations with banks and other funding partners. For example, in our credit lines with the bank, funding costs or credit ratings, are they generally remain stable? Some color around that will be very helpful to us. My second question is on the growth potential in our international markets, especially the matured markets. We do understand that FUTU already has a very strong presence in Hong Kong and Singapore. How do you think about the runway ahead for continued growth in these markets? Thanks a lot.

Thank you, Leo. Let me answer these two questions. First of all, regarding the credit and credit rating, indeed, this week, my colleagues and credit rating agencies, including our global business bank partners, have very close communication. We are also very happy to share with you that the current credit rating of our entire bank is stable and there are no changes. For first questions regarding the credit facility and also the credit rating, actually this work I and my teams had a very constructive discussions with our credit rate agency and the commercial bank partners around the global. I'm very happy to share that our credit facility remains intact and in the next couple of weeks we are very likely to get our annual credit rating issued by S&P and I'm very confident there will be a good result. Go ahead. The second question is about the mature market of Hong Kong and Singapore. I do think that the gap between Hong Kong and Singapore, from the number of users covered, is already at a very high level. But from the penetration and digging of clients' assets, we still have a very large space. For example, recently, the Boston Information Company has just released a report that Hong Kong has officially surpassed Switzerland. to become the world's largest cross-border financial management center. In this report, Singapore is also ranked third. According to the public statistics of the Hong Kong Politburo, by the end of 2024, the financial and financial assets of Hong Kong are more than 350 million Hong Kong dollars. According to the statistics of the Singapore Financial Administration by the end of 2024, the financial and financial assets of Singapore are also more than 340 million Hong Kong dollars. In comparison, FUTU Group's total total customer assets are only 10,000 Hong Kong dollars. In Hong Kong and Singapore, two international financial centers, with the continued improvement of brand influence, we have just started the deep service layout of residential wealth of hundreds of millions of Hong Kong dollars in the two places. The ceiling is still very high, and the space of the track is also very wide. After more than 11 years of continuous polishing, we have established a very rich product quality and excellent customer service capability. While FUTU has achieved a very extensive user coverage in Hong Kong and Singapore, there remain enormous potentials for further penetrate and grow client assets. A recent report issued by BCG states that Hong Kong has overtaken Switzerland to become the world's largest support for the wealth management hub, with Singapore ranking the third. According to the public data by SFC, Hong Kong's wealth management assets exceed 35 trillion Hong Kong dollars by the end of 2024. Data from the MAS also shows the city's state's wealth management assets also topped HK$34 trillion over the same period. By contrast, Futures Group's total assets stand now just over HK$1 trillion. As two major international financial hubs, Hong Kong and Singapore boasted trillions of HK$ in resident wealth. With our brand influence continuing to grow, our in-depth wealth service in these two markets are still in the early stage. The market upside remains substantial with vast room for development. After more than a decade of refinement, we have built a comprehensive product portfolio, outstanding customer service capabilities, and expanding global financial service ecosystems. We are fully confident in the future, and we will keep optimizing our offering and further deepen our presence in these two mature markets.

Thank you.

Thank you. And one moment as we move on to our next question. Our next question comes from the line of Chiao Hung with MS. Your line is open. Please go ahead.

Thank you, Ms. Guan. I'm Chiao from Monk Stanley. I'd like to ask two questions about the new business. First, I'd like to ask what kind of opportunities we've seen in the U.S.预测市场. What kind of layout do we have now? And what kind of cooperation will the U.S.预测市场 have with the existing U.S. business? How do you see the profitability of this business and the current market size? This is the first question. The second question is to ask about the latest industry situation of VATP in Hong Kong. What are the updates after the acquisition of the product and strategy? What kind of connection will there be in the future in the crypto business with Singapore, including the US crypto business? So basically, two questions from me. One is on the US prediction market. What is the main opportunity that the company is focusing on, and what's the planning here? Is there any synergy with the current business in the U.S., and how do management see the margin and the TAM of this business in the U.S.? And second question on the crypto business in Hong Kong, especially regarding the VATP, is there any update on the product and the strategies, and also potentially what kind of synergy could we have between the Hong Kong crypto business with that in Singapore and the U.S.? ? And also wondering how does management think about, you know, at what level of a client asset should be in crypto in order for us to see a meaningful monetization opportunities and roughly what time it's going to take. And the time we're spending is more on building our own infrastructure and product offerings or just to, you know, for the acceptance of a client to grow. Thank you.

Let me answer the first question. The second question is related to the Tencent Trade business. I will ask my colleague Alan to answer it. As Liv mentioned in the opening remarks, MoMo Financial and PutoClearin in the U.S. have officially obtained the FCM license in May of this year, which allows them to carry out the prediction of the market economy and related liquidation business. While promoting the license application, we have also completed some of the construction of products and system capabilities. Therefore, it is expected that we will soon be able to open up the trading services related to the prediction market to our US retail investors. Compared to traditional goods and products, the pattern of prediction market products is more intuitive. The threshold of understanding is also lower, and the way users participate will also be more flexible. This is not only helpful for the participation of retail investors in the financial market, but also promotes general finance and is expected to become a brand customer, to increase the activity of transactions and promote the transfer of customers. So in the past, we have also seen a lot of players in the US's prediction market, such as Polymarket, Kashi, and Robinhood. They all have a very good business growth in this area. At the same time, we also see that for the prediction market products in the world of hedging finance, So it's something that we don't even have the time to think you think you can do it. So you're going to think you can do it. He said he said, well, we're going to try and get a little bit of the whole thing. So you're going to try and get a little bit of the whole thing. So you're going to try and get a little bit of the whole thing. On the other hand, more importantly, we hope to use this to accumulate our core know-how in product design, operation management, risk control, and so on, to develop predictive market business in more areas in the future to gain experience. Currently, we are also working with some regulators in other regions to actively communicate and explore the scope and possibility of predictive market events. Thanks for the questions. Regarding the prediction markets, MoMo Financial and Futu Clearing officially obtained OPCM license in May, allowing us to conduct prediction market brokerage and the clearing business. Alongside the license application process, we have also completed the development of our product and the system capabilities and expect to launch production market trading service to our U.S. retail funds in the near future. Compared with traditional derivatives, such as futures, prediction markets, products are generally more intuitive, easy for clients to understand and offer more flexible participation mechanisms. This not only helps improve retail participation in financial markets and promote broader financial inclusion, but also has the potential to become the important driver for client acquisition, trading activation, and the client conversion on the platforms. And we also witnessed in the past couple of months, a lot of major U.S. players, such as, you know, Kashi, Holy Markets, and Robinhood, make a huge progress in terms of new client acquisition through these new product offerings. And also, for production market product linked to the financial events, market makers' hedging activities around underlying assets could further enhance liquidity in both sport and the derivative markets. while also strengthening the overall price discovery efficiency across security markets. Our expansion into the production market business in the U.S. is not only intended to capture the rapid growth opportunity in the local market, but I think more importantly is to accumulate core know-how in areas such as product design, operational management, and risk control. We believe this experience will help lay the foundations for expanding production market business into additional markets in the future. At the present, we are also very actively engaging and discussing with regulators in other jurisdictions regarding the scope and the feasibilities of production market products. Thank you.

Hello, Chi-Yang. Hello, I'm Allen. As Liv mentioned in the opening remarks, in March, we officially passed the second phase of the VATP approval of the Hong Kong SSC. It is now in full swing. In the future, we plan to promote the development of our business around three major aspects. First of all, we want to continue to strengthen the ability of our internal interoperability and flow. Currently, a part of FUTU Securities, a part of Crypto's trading volume, and AOM have been moved to our crypto exchange. In the future, with more virtual assets in the region, we will actively explore the cryptocurrency business around the world under the framework of this virtual. This is the possibility of deepening ties with our crypto exchange. The second is that we want to continue to enrich our virtual asset product capabilities. Under the supervision of miners, we plan to gradually promote OTC transactions, more B-type support, and some core functions such as suppression, to provide our high-quality customers and institutional customers with a more complete service of virtual assets. At the same time, owning the license plate of this exchange can also allow us to directly participate in the construction of a basic facility in the industry, and explore the opportunity of innovative products such as permanent contracts. Third, we want to build a longer-term ecological capacity. In the future, we hope to continue exploring, for example, the second-tier market transactions of currency-based securities. For example, we want to connect the energy of the third-party economy and provide a solution that covers from IOT, trading, control, to suppression. With the gradual integration of traditional finance and virtual asset markets, We believe that the domestic exchange is an opportunity to grow into an important infrastructure platform for Hong Kong's foreign trade. As for Hong Kong and Singapore, we believe that the domestic asset industry in the two places is still in an early stage of development. We will continue to educate investors and create new scenarios for the future. So let me quickly translate. So in March, as Liv mentioned in opening remarks, Pandertree successfully passed the second phase approval of the Hongkou FFC's VATP lessons and officially commenced cooperation. So going forward, we will focus on advancing the business across three dimensions. So firstly, we will strengthen the internal synergy and traffic conversion capability. So currently, a portion of Fuji Security's virtual asset trading volume and AUM has already migrated to PandaTrade. Looking ahead, as the group gradually secures compliant virtual asset lessons in additional regions, we will actively explore deeper collaboration opportunities between our regional cryptocurrency brokerage businesses and Pinterest trades with applicable regulatory frameworks. Second, we will continue to enhance our virtual asset productivity. Subject to regulatory approval, we intend to progressively introduce core functionalities such as ODC trading, additional token listings, and staking services. Basically, enabling us to provide more comprehensive virtual asset solutions for high net worth and institutional clients. Meanwhile, holding an exchange license also allows the group to participate more directly in industry infrastructure development and actively explore innovative product opportunities, including perpetual futures. And certainly, we aim to build a long-term ecosystem capability. So in the future, we plan to explore secondary market trading for tokenized securities integration with third-party brokers, and one-stop solutions for virtual asset ETF issuers covering IOP, trading, custody, and staking services. So as traditional finance and virtual asset markets continue to converge, PencilStreet has the potential to evolve into a key infrastructure platform within the Hong Kong Web3 ecosystem. And we think Hong Kong and single markets, especially for the crypto part, are still in the early stage of development. So for FUTU, we will continue to do investor education and product innovation. So as a platform that has both brokerage and crypto exchange capability, we think we're very confident in the future growth potential of the overall crypto business.

Thank you.

Thank you. One moment for our next question. Our next question is going to come from the line of Emma Su with B of A Securities. Your line is open. Please go ahead.

Thank you for giving me the opportunity to ask this question. I have two questions about business. We saw that in the first quarter, the interest rate was still down a lot. It dropped by 12.8 percent. Can you please help us with the analysis of the interest rate in the first quarter, and the reason for the change in the interest rate in each category? So the first question is about the interest income. So we thought that interest income declined 12.8% sequentially. So could you please provide the breakdown of your interest income by category, drivers of the quarter-over-quarter changes for each item, as well as the quarter-to-day trends? The second question is about the operating trends in second quarter so far. So could you update us the latest new founded accounts, AUM, including the net asset inflows and mark-to-market changes? as well as the trading volume. Thank you.

Okay, thank you, Emma. I will answer the first question about interest income. The second question, I will ask my colleague, Alan, to answer. The entire first system, the entire structure of our group's interest income, the cash interest income and the interest income of the fund, each account accounts for about 40%. The rest of this part comes from our savings business. There are several reasons for the decline in interest income. On the one hand, there is a decline in cash interest income, and on the other hand, there is a decline in bond interest income. The interest income of the financing sector is actually increasing. Specifically, the decline in cash interest income is due to the reduction of the U.S. Federal Reserve in mid-July last year. The reduction has been fully reflected in this quarter. On the other hand, This quarter, due to the market fluctuation, our customers are relatively active in the market. This led to a decline in the Japanese cash flow. This will have a certain disadvantage for our cash interest income. On the contrary, because everyone is active in the market, Instead, it increases our interest income in financing. This interest income has been increasing in this quarter. The interest income decline in bonds is mainly due to a factor in the market, especially in this quarter. In the US stock market, the overall market volatility has dropped, and the demand for an empty client has dropped. At the same time, the income of bonds also has a relatively significant decline. Now, let me very quickly translate. In the first quarter, approximately 40% of group interest income was from idle cash, then another roughly 40% contributed by margin financing. The remaining mainly came from the stock borrowing and the lending business. The Q over Q decline in interest income was mainly attributed to lower stock borrowing and idle cash interest income, while margin financing interest income achieved a sequential growth. Idle cash interest income decline due to two reasons. Number one is Fed rate cut in May, December last year was fully reflected in the first quarter. Then secondly, heightened market volatility during the quarter drove more active buying dip behaviors among clients, leading to sequential decline in average daily cash balance which also weigh on idle cash interest income. By contrast, supported by active margin trading activity in both the US and Hong Kong, our margin financing balance increased meaningfully on QMQ basis, therefore contributing more margin financing interest income. At the same time, security borrowing interest income declined sequentially mainly due to market factors, As the implied volatility in the U.S. equity market was going down in the first quarter, overall short-setting demand moderated, leading to a meaningful decline in security lending yield at the same time. Based on the current runway in the second quarter, we expect the overall interest income to remain broadly stable, queue-on-queue. Thank you.

Hello, Emma. I'm Allen. Let me reply to your second question. According to 2Q's run rate, the number of our competitive real estate customers is expected to remain stable at the bottom of the ring. We see that the second quarter has maintained a relatively good trend of growth. Last Friday, this matter interfered with the short-term income, but the overall impact is controllable. And then we think that Matsumaki has benefited from the performance of the quarter today market, so this number is a positive number. Okay, let me quickly translate. So based on the current second quarter run rate, the net new funding accounts are expected to remain stable sequentially. That is that inflows have maintained the strong growth momentum seen in the first quarter. Well, last Friday's regulatory developments created some short-term disruption to net inflows. The overall impact remains manageable. And benefiting from positive quarter-to-date March market performance, as well as continued active client trading behavior, both AUM and trading volume have the potential to achieve double-digit sequential growth.

Thank you. Thank you, and one moment for our next question.

Our next question comes from the line of Charles L. with UBS. Your line is open. Please go ahead.

Hello, everyone. I'm Charles Zhou from UBS. I have two questions. First of all, we have seen that the ant acquisition of pharmaceutical securities has also fallen recently. At the same time, VNEO is also actively advertising in Hong Kong. Ant Bank and China Bank have also continued to launch transactions of Hong Kong and U.S. stocks. So I want to ask the company how to view the competitive pattern of the entire Hong Kong market. It looks like the competition is intensifying. The second question is that since this year, Korea's technology stocks have still been very hot. I would like to ask if the company has any plans to launch Han shares in the near future. Can you talk about the timeline, including which markets to launch the plans in? Good evening, this is Charles Zhou from UBS. So I have two questions. The first, we have seen recent developments such as end acquisition of Bright Smart Securities, intensive marketing by Weibo, the launch of the Hong Kong and U.S. stocks trading function by AntBank and ZA Bank. So how does the company view the intensifying competition hong kong markets my second question is related to south korean you know markets we also note that the korean tech stocks have been performing very very strong year today so does the company have any plans to expand into the korean equity markets would appreciate you know if you can share some details such as their timeline or maybe the target markets thank you

I would like to ask my colleague Robin to answer. First of all, I think that Hong Kong is still a market that has a long-term space for growth. According to a recent report by the Executive Officer of Hong Kong in 2025, it also mentions that since the Hong Kong government launched a series of new income and talent policies, more than 230,000 people have come to Hong Kong to work and develop. Ah, ah, ah, ah, ah. that we can still steadily expand our customer size, customer assets, and market share. The core behind this is because we have established a multi-dimensional competitive model with a time barrier. In terms of product service, we have already built a military financial service platform in Hong Kong and continue to upgrade our, for example, AI and other innovative applications. In a competitive way, to provide customers with a first-class product experience. Just like the second question you asked, we actually have a plan to launch a trade like Hangu to increase our product supply. In terms of brand, we have established a very strong brand awareness and customer trust in Hong Kong in the past ten years. There are also more and more customers who are willing to put their core assets on the payment platform for a long time. The proportion of our high-quality customers has also been continuously improved in the past few seasons. I don't think this is a short-term marketing that can be reproduced very quickly. Finally, I think competition is not a bad thing. Hong Kong is originally the most competitive financial market in the world. In the long term, The competition will also promote innovation in the entire industry. For those with product, brand, and eco-friendly investment platforms, there is a chance to further improve the market share. Moreover, in Hong Kong, such an international financial center, with the promotion of our brand, as I mentioned earlier, compared to the hundreds of millions in Hong Kong, Let me very quickly translate. First, we think Hong Kong remains a market with significant long-term potentials. According to the Hong Kong Chief Executive's 2025 policy address, Since the launch of various talent admission initiative, more than 230,000 professionals have relocated to Hong Kong for work and development opportunities. Against the backdrop of rising global market uncertainties, increased number of high net worth individuals and international capitals are also flowing into Hong Kong, driving continued expansion in market wealth and asset pools. For FUTU, we remain very confident in our own competitiveness. Even several well-known peers have entered into the Hong Kong market in recent years. We have continued to see steady expansions in our customer base, client assets, and the market share. At the core of this achievement is multi-dimensional competitive mode we have built over time, supported by time barriers to entry. On the product and the service front, We have already established a comprehensive one-stop financial service platform in Hong Kong while continuous enhancing innovative capabilities such as AI applications. Combined with competitive pricing, this enables us to deliver industry-leading user experience to our clients. More recently, we have also planned to launch career stock trading as you just asked before. From a branding perspective, We have spent more than a decade deeply cultivating Hong Kong market and has established very strong brand recognition and client trust. An increasing number of clients are willing to place their core assets with Futu's platform over the long term, while the proportion of high net worth clients continue to rise in the past couple of quarters. This type of brand equity cannot be replicated through short-term marketing spending alone. Finally, we do not view competition as a purely negative thing because Hong Kong has always been one of the world's most competitive financial markets. Over the long run, competition drives industry innovations. For leading platforms with strong product capabilities, brand trust, and equal system advantage, competition may in fact create opportunities to further consolidate market shares. More importantly, in Hong Kong as a global financial center, we believe our penetration into the tens of trillions of dollars of personal investable assets is still at a very early stage, while all brands continue to mature. Supported by our long-term accumulated strengths, we remain highly confident in our abilities to continue growth both in client and the client's assets in the Hong Kong market.

Thank you.

Thank you. And one moment, Farhan.

Next, let me answer a question about our stock market plan. As you know, in April, Futu Niu Niu and Mumu have already launched the stock market. The team is currently actively promoting the relevant preparation work of the stock market's trading functions. We expect to launch the first batch in Hong Kong and Singapore in June. Other regions will also continue to support. At this stage, many customers mainly use products such as GANGAN ETFs. to indirectly obtain the long-term purchase of Hangu. As of May 26, Fudu Securities' customers hold two Beidodo Samsung Electronics in the south and two Beidodo Helix in the south, with the storage ratio of related products being 30% to 18%. This actually reflects the strong investment needs of customers' Hangu, especially the core landmark of the AI industry chain. In April, Futubu and Mumu officially supported real-time market data for South Korean stock.

Our team is currently actively preparing for the rollout of software and soft trading, which is expected to first launch in Hong Kong and Singapore in June, with more regions to follow progressively thereafter. Currently, many clients friendly gain exposure to software and equity indirectly through leveraged ETFs and similar products. As of May 26, Fuji Securities' clients accounting for approximately 30% and 18% of the holdings in the C-SOP 2x leverage ETF on Samsung Electronics and C-SOP 2x leverage ETF on SK Hedix, respectively, reflecting strong client demand for soft credit activities, particularly named within the AI supply chain. As a leading one-stop investment and trading platform, FUTURE remains committed to providing clients with diversified global asset allocation opportunities and best-in-class trading experience. And we will continue to monitor the potential of other international stock markets and dynamically evaluate additional market access opportunities based on the client demand and commercial value.

Thank you. And this will conclude today's question and answer session. I would now like to hand the conference back over to Alan Tway for closing remarks.

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.

This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone, have a great day.