Q4 2023 Futu Holdings Limited Earnings Call
Operator: Sponsored ADR Class A Hello, ladies and gentlemen, welcome to Futu Holdings' fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode.
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Hello, Ladies and gentlemen, welcome to Sue to holdings fourth quarter and full year 2023 earnings conference call.
At this time all participants are in a listen only mode.
Operator: After management's prepared remarks, there will be a Q&A session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Daniel Yuan, Chief of Staff to the CEO and Head of IR at Futu. Please go ahead, sir.
After managements prepared remarks, there will be a Q&A session today's conference call is being recorded.
Do you have any objections you may disconnect at this time.
I would now like to turn the conference over to your host for today's conference call Daniel Yuan Chief of staff to see Yo and head of IR at six two please go ahead Sir.
Daniel Yuan: Thanks, operator. And thank you all for joining us today to discuss our fourth quarter and full year 2023 earnings results. Joining me on the call today are Mr. Li Fei, Chairman and Chief Executive Officer, Arthur Chen, Chief Financial Officer, and Robin Xu, Senior Vice President. As a reminder, today's call may include four forward-looking statements, which represent the company's beliefs regarding future events. Sponsored ADR Class A, Forward-looking statements involving caravans and insurgents. 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 SANO report. With that, I will now turn the call over to Li.
Thanks, operator, and thank you all for joining us today to discuss our fourth quarter and full year 2023 earnings results. Joining me on the call today are Mr leaf Li Chairman and Chief Executive Officer, Arthur Chen Chief Financial Officer, and Robin Qi 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 the company's control.
Forward looking statements and Bobby here about 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 leaf leaf will make his comments from Chinese and Alex halfway.
Li Fei (translated by Daniel Yuan): Li will make his comments in Chinese, and I will translate. Thank you all for attending today's ADR meeting. In the fourth quarter, we competed with more than 50,000 to 90,000 real estate clients. As of the end of 2023, we had more than 1.7 million real estate clients, a 15% increase from the previous year. The growth of our customers over the past 2-3 years has exceeded our expectations at the beginning of the year. Our total paying clients as of year-end reached over 1.7 million, representing 15% growth year-over-year and exceeding our guidance. In the 4th quarter, Singapore's shipping continues to grow at a high rate. In the background of high interest rates and high market volatility, the monetary fund continues to gain customers' favor. In December, we cooperated with Fudun Fund Management Corporation and sold a new yuan monetary fund exclusively. This fund is also the only one in the Singapore market dedicated to the T-Jarling New Yuan Fund for retail investors.
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Total paying clients as of year end reached over $1 7 million, representing 15% growth year over year and exceeding our guidance.
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Daniel Yuan: Client acquisition in Singapore sustained high growth into the fourth quarter. Money market funds continue to garner significant client interest amid high interest rates and market volatility. In December, we became the first and only distributor of Fullerton Fund Management's Singapore Dollar Denominated Money Market Fund, the only T plus zero Singapore dollar money market fund for retail investors in Singapore. Thanks to our rich market information, comprehensive financial data, and active community, we have continued to attract new users in Japan. According to data from Data AI, in the fourth quarter, the daily download volume of MIMO APP in Japan ranked in the top three of all bookstores, surpassing local old-style bookstores' Yechun and Songjing bookstores.
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Client acquisition in Singapore sustained high growth into the fourth quarter money market funds continue to garner significant client entrusts amid high interest rate and market volatility.
In December we became the first and only distributor of Fullerton Fund management, Singapore dollar denominated money market funds, the only people zero, Singapore dollar money market fund for retail investors in Singapore.
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Daniel Yuan: As the daily index recorded a sharp rise and continued to create a new high, in the first quarter, the number of customers in Japan was significantly higher than before. We have continued to optimize the opening process to reduce the loss of re-users in the asset customer segment. We are also continuing to promote key products to the market. In December, we launched a growth-type MISA account. We plan to launch Japanese stocks soon. We also expect to provide Japanese stocks to customers in Hong Kong and Singapore in the second quarter. We continue to gain user mindshare in Japan with our rich market information, comprehensive market data, and interactive social community. In the fourth quarter, the average daily downloads of MumuApp in Japan ranked top three among all brokers and surpass those of Nomura and Matsui Security, according to DataEI.
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Daniel Yuan: With the Nikkei recording remarkable gains and hitting new highs, client acquisition in Japan also showed a notable sequential increase in the first quarter. We continue to streamline the account opening process to reduce leakage in the conversion funnel, and we focus on R&D for key investment products. We launched an ISA growth account in December and will soon roll out Japan equities trading. Our clients in Hong Kong and Singapore will also have access to Japanese stock trading in the second quarter. In the 4th quarter, Hong Kong's market is in a low mood, and local customers are slowing down, but with the rise of Hong Kong's stock market in the 1st quarter, there has been a rebound. In the U.S., we continue to pay attention to customer quality.
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It will still go out Japan equities trading our clients in Hong Kong, Singapore will also have access to Japan stock trading in the second quarter.
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Daniel Yuan: In the 1st quarter, the number of new asset customers increased by about 30%. In Australia, we focus on brand construction and product listing, and in the 4th quarter, we focus on cash management products. However, client acquisition in Hong Kong slowed down due to sluggish market sentiments.
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Client acquisition in Hong Kong slowed down due to sluggish market sentiment you have rebounded in the first quarter, along with the recovery of the Hong Kong stock market.
Daniel Yuan: It rebounded in the first quarter along with the recovery of the Hong Kong stock market. In the U.S., we continue to prioritize client quality over quantity. With the average asset balance of new paying clients in their first quarter of onboarding increasing by over 30% compared to the last quarter. In Australia, we focused on cultivating brand equity and adding new products, including cash management. On February 26 this year, we officially launched our financial and economic services in Malaysia.
In the U S. We continue to prioritize client quality over quantity with the average asset balance of new paying clients in their first quarter of on boarding increasing by over 30% compared to the last quarter.
In Australia, we focused on cultivating brand equity and adding new products, including cash management.
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Daniel Yuan: Since the launch of ADR Class A, the number of customers has increased rapidly. Within a week of the launch, the number of customers exceeded 30,000. This is the fastest growth in the international market. In the past three years, the market share in Singapore has grown rapidly, and the brand's influence is wide-ranging.
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Daniel Yuan: Since the launch of ADR Class A, we have accumulated a high level of popularity in Malaysia. On February 26th, we launched our Brokerage Business in Malaysia and gained significant traction. Over 30,000 clients flocked to our platform within one week of the official launch, representing the fastest growth in any of our international markets. We managed to generate high brand awareness in Malaysia from the outset thanks to our rapid share gain in Singapore over the past three years. This year, we have seen strong growth of asset clients in various markets. This year's two-month competitive asset clients and entry-level sales have exceeded last year's fourth quarter. Due to our strong market share so far this year, we expect to compete with 350,000 asset clients in 2024. We observed robust paying client growth across all markets.
Over 30000 clients locked our platform within one week the official launch representing the fastest growth in any of our international markets.
We managed to generate high brand awareness in Malaysia from the outset, thanks to our rapid share gain in Singapore over the past three years.
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We observed robust paying client growth across all markets. This year in fact, we attracted more paying clients and net asset inflows in the first two months this year than the entire fourth quarter given the strong momentum year to date, we are guiding for 350000 net new paying clients in 2024.
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Daniel Yuan: In fact, we attracted more paying clients and net asset inflows in the first two months of this year than the entire fourth quarter. Given the strong momentum year to date, we're guiding for 350,000 net new paying clients in 2024. Clients' total assets increased by 16% on the same day and increased by 4% in return, reaching HK$4,860 billion. Management growth is mainly due to the increase in the market value of customers' U.S. stocks and the strong entry of various markets. In Singapore, Due to the strong entry of all Call Hot clients, the total assets of the clients and the balance assets have increased by 25% and 17% respectively. We have more than 17,000 new members. As our brand's influence continues to grow, more and more high-profile people are starting to like MuMu. Total client assets increased by 16% year-over-year and 4% quarter-over-quarter to HK$486 billion.
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Total client assets increased by 16% year over year, and 4% quarter over quarter to 486 billion Hong Kong dollars. The sequential increase was largely due to robust not outside airflow across all regions and the market appreciation of our clients use stockholding and.
In Singapore total client assets in average client assets posted sequential increase of 25% and 17% respectively.
Average client assets with over 17000, Singapore dollars due to strong inflows across cohorts.
As we continue to build brand equity luminal gain traction among high net worth clients sustainable.
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As of quarter end margin financing that securities lending balance increased marginally by 2% quarter over quarter, while we saw an uptick in securities lending balance Regulus stock margin financing balance decline as clients by inbound they're positioned.
Daniel Yuan: The sequential increase is largely due to robust NASDAQ inflows across all regions and the market appreciation of our clients' U.S. stockholdings. In Singapore, total client assets and average client assets posted sequential increases of 25% and 17%, respectively. Average client assets were over $17,000 Singapore dollars due to strong inflows across cohorts.
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Daniel Yuan: As we continue to build brand equity, MUMU gained traction among high-net-worth clients in Singapore. At the end of the quarter, the growth rate of financing and financing increased by 2%, although the balance of each share has risen. However, some customers continue to save in the fourth quarter, resulting in a decrease in the balance of financing. As of quarter end, the margin financing and securities lending balance increased marginally by 2% QOQ. While we saw an uptick in securities lending balance for U.S. stocks, the margin financing balance declined as clients unwound their position. The total transaction volume was 9,571 HKD, 12% lower than Huan Bi Jun, the end of the fourth quarter. Hong Kong stocks and US stocks traded at 13% and 12%, respectively. Hong Kong stocks are in a bad mood. As a result, U.S. tech stocks traded at a decline, which has dragged down the total trading volume. In the fourth quarter, the share of Hong Kong's derivatives market grew steadi In the fourth quarter, Hong Kong and US stock trading volume was down 13% and 12% sequentially.
<unk> five <unk> five and the subsidy on cheap total trading volume was 957 billion, Hong Kong dollars down, 12% year over year and quarter over quarter, and the fourth quarter, Hong Kong and U S stock trading volume were down, 13% and 12% sequentially with.
Sentiments around Hong Kong equities, and lower turnover and U S Tech stocks dropped total trading volume our.
Our share gains in the derivatives market in Hong Kong was a bright spot.
Total futures and options trading at eight 5% and 14, 7% market share in the fourth quarter respectively.
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Total client assets in wealth management increased by 82% year over year, and 11% quarter over quarter to 58 billion Hong Kong dollar accounting for 12% of total client assets.
<unk> increased their allocation in money market funds and U S Treasury Bill to harvest high yields.
<unk> Bond holdings as a result increased by over 60% quarter over quarter, we continue to enrich our structured products by Onboarding accumulator note a product that allows clients to sell their stock positions out of premium.
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Our enterprise business has 414, IPO distribution and IR clients up 24% year over year in the fourth quarter, we acted as joint book runners for several high profile, Hong Kong Ipos, including those of TNT Express and <unk>.
Daniel Yuan: Weak sentiments around Hong Kong equities and lower turnover in U.S. tech stocks drag total trade volume. However, our share gains from the derivatives market in Hong Kong were a bright spot. Hong Kong futures and options trading had 8.5% and 14.7% market share in the fourth quarter, respectively. Assets managed by FIAT have reached HK$58.1 billion.
We underground 37, Hong Kong Ipos in 2023 and ranked first among all brokers according to wind.
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Thank you Lee well, Daniel before going through our financial performance I'd like to give you an update on our latest share repurchase program announced on March 11, 2022 as of December 2000.
Daniel Yuan: The share price has increased by 82%, and the return on investment has increased by 11%. It accounts for 12% of the total value of the client's assets.
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Daniel Yuan: In order to gain a stable income, the share price has been constantly increasing due to the addition of U.S. funds and U.S. bonds. As a result, the return on investment has increased by 60%. This quarter, we will continue to enrich the supply of structured products. We have launched a cumulative 7-choice selection.
We have put in place unused share repurchase program, which approved and authorized us to repurchase up to $500 million U S. Dollar of Avs before December 31 2025.
Now please allow me to walk you through our financial performance all numbers, how you handle that.
Daniel Yuan: This product allows clients to sell their shares at a discounted price. Total client assets and wealth management increased by 82% year-over-year and 11% quarter-over-quarter to HK$58 billion, accounting for 12% of total client assets. Clients increased their allocation in money market funds to U.S. Treasury Bills to harvest high yields. Total bond holdings, as a result, increased by over 60% quarter over quarter. We continue to enrich our structure products by onboarding Accumulator Notes, a product that allows clients to sell their stock positions at a premium. In the 4th quarter, our company had 414 ICOs and IR customers, which is a 24% increase. In the fourth quarter, we, as a joint ledger manager, participated in many major Hong Kong initial public offerings, including Jipu Real Estate and UB Select.
Otherwise noted.
Revenue was $2 4 billion up 4% from $2 3 billion in the fourth quarter of 2022, we ended 2023 with full year revenue growing 31% to $10 billion.
Brokerage Commission and handling charge income was 904 million a decrease of 14% year over year and 10% Q over Q.
The decrease was mainly driven by lower trading volumes.
Interest income was $1 3 billion up 17% year over year and down 11% Q over Q the year over year increase was mainly driven by higher interest income from client cash deposits due to higher benchmark interest rate and higher margin financial income due to the increasing daily average margin balance.
The Q over Q decrease was mostly driven by the lower interest income bronchi cash deposit due to a decrease in daily average client cash balance.
Operating income was $137 million.
46% year over year, largely flat Q over Q the year over year increase was primarily attributed to higher distribution income, partially offset by lower enterprise public to public relationship service income.
Daniel Yuan: In 2023, we sold 37 Hong Kong stocks in a row. According to Wan Zhe's statistics, the number of sales of our Hong Kong stocks has not been the first in the industry. Our enterprise business has 414 IPO distribution and IR clients increased by 24% year-over-year. In the fourth quarter, we acted as joint book runners for several high-profile Hong Kong IPOs, including those of JMT Express and Ubitex.
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Our total cost of 433 million, an increase of 27% from 342 million in the fourth quarter of 2022.
Brokerage commission and handling charge expenses were $59 million down 8% year over year, 6% Q over Q.
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Our brokerage commission and handling charge income, partially offset by the cost of migrating our SPX equities to our self clearing system.
Interest expenses were 271, million% to 49% year over year in the down 6% Q over Q.
Yu Chen: We underwrote 37 Hong Kong IPOs in 2023 and ranked first among all brokers, according to WIMP. Next, I'd like to invite our CFO Arthur to discuss our financial performance. Thank you, Li Wan and Daniel. Before going through our financial performance, I'd like to give you an update on our latest share repurchase program announced on March 11, 2022. As of December 31, 2023, the expiration date of the program, we had a repurchase aggregate of 11 million ADRs with approximately $365 million total repurchase amount in open market transactions.
The year over year increase was driven by higher interest expenses associated with our security borrowing in the lending business and the higher module financing interest expenses.
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Processing and servicing costs was $104 million up 7% year over year in the 21%. The increase was largely due to higher product service fee or new markets and higher system usage fees.
As a result, our total gross profit was 1.9 billion largely flat year over year gross margin was 81, 7% as compared to 85% in the fourth quarter of 2022.
Operating expenses was up 12% year over year, and 3% Q over Q, so $916 million.
Yu Chen: We have put in place a new share repurchase program that allows and authorizes us to repurchase up to 500 million U.S. dollars of ADS before December 31, 2025. Now, please allow me to walk you through our financial performance. All numbers are in Hong Kong dollars unless otherwise noted. Total revenue was $2.4 billion, a 4% increase from $2.3 billion in the fourth quarter of 2022. We end 2023 with full-year revenue growing 31% to $10 billion. Brokerage Commission and Handling Charge Income was $904 million, a decrease of 14% year-over-year and 10% in Q2. The decrease was mainly driven by lower trading volume.
<unk> expenses were $363 million up 9% year over year at a 1% Q over Q the year over year increase was mainly due to increasing R&D headcount as we continue to support new product offerings in international markets.
Selling and marketing expenses was 182 million up 19% year over year and down 14% Q over Q the year over year increase was due to a 41% year over year increase in net new paying clients, partially offset by lower customer acquisition cost.
Q over Q decrease was due to fewer net new clients and the lower customer acquisition costs.
G&A expenses were $317 million up 12% year over year.
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Yu Chen: Interest income was $1.3 billion, up 17% year-over-year and down 11% Q-over-Q. The year-over-year increase was mainly driven by high interest income from clients' cash deposits due to a higher benchmark interest rate and higher margin financing income due to an increase in daily average margin balance. The Q over Q decrease was mostly driven by the lower interest income from client cash deposits due to a decrease in daily average client cash balance. Other income was $137 million, 46% year-over-year and largely flat Q-over-Q.
As a result income from operations decreased 9% year over year, and 22% Q over Q2 1 billion operating margin declined to 43.
1% from 49, 1% in the fourth quarter of 2022, mostly due to operating deleverage.
Our net income decreased by 9% year over year in the 20% Q over Q2 eight.
876 million net income margin shrank to 36, 9% in the fourth quarter as compared to 42% in the same quarter last year.
Among our international business, Singapore was the first to achieve breakeven on a quarterly basis, even with a portion of pump headquarter.
Client asset continue to grow we believe the unit economics in Singapore will maintain upward tragic take that.
Yu Chen: The year-over-year increase was primarily due to higher fund distribution income partially offset by lower enterprise public relationship service income and underwriting fee income. Our total cost was $433 million, an increase of 27% from $342 million in the fourth quarter of 2022. Brokerage commission and handling charge expenses were $59 million, down 8% year-over-year and 6% Q-over-Q. The decrease was roughly in line with our decrease in our brokerage commission and handling charge income, partially offset by the cost of migrating our SGX equities to our sales clearing system. Interest expenses were $271 million, a 49% year-over-year increase and a down 6% QQQ.
That concludes our prepared remarks, we'd now like to open the call to questions. Operator. Please go ahead. Thank you.
Thank you to ask a question you will need to press star one and one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one and one again, so once again Thats star one to ask a question. Please standby, while we compile the Q&A.
Thank you, we'll now take the first question.
Please standby.
First question today is from the line of Cindy Wang from China Renaissance. Please go ahead.
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Yu Chen: The year-over-year increase was driven by high interest expenses associated with our security borrowing and lending business and higher margin financing interest expenses. The Q over Q decrease was mostly due to lower interest expenses associated with our security borrowing and lending business, partially offset by high margin financing interest expenses. Processing and servicing costs were $104 million, 7% year-over-year and 21% in Q2. The increase was largely due to higher product service fees for new markets and higher system usage. As a result, our total gross profit was $1.9 billion, largely flat year-over-year.
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Thanks for taking my call and I have to.
A question and I have two questions first one is what's your progress of improving account opening.
Yu Chen: Gross margin was 81.7% as compared to 85% in the fourth quarter of 2022. Operating expenses were up 12% year-over-year and 3% QQQ, so 916 million. R&D expenses were 363 million, up 9% year-over-year and 1% QQQ. The year-over-year increase was mainly due to increasing R&D headcount as we continue to support new product offerings in international markets. Selling and The year-over-year increase was due to a 41% year-over-year increase in net new paying clients, partially offset by lower customer acquisition costs. And the Q-over-Q decrease was due to fewer net new clients and lower customer acquisition costs. G&E expenses were $370 million, up 12% year-over-year and 15% Q-over-Q.
Opening process in Japan, and could you provide more color on.
New paying client acquisition in fourth quarter last year versus first quarter.
So far in Japan, Alpine, which you expect to launch Japan stock trading.
And the second question is regarding to the new paint line shall we see the new paying client target of 250000 in can you touch points very impressive.
Could you breakdown by key markets.
Including like Hong Kong, Singapore, U S, Japan et cetera. Thank you.
Thank you Cynthia I will take your second question first and that was the first question to my colleagues Daniel in terms of our new targets for 2020 for the contributions from Singapore, Hong Kong and.
The Australia, alc's existing buckets or absolute terms should be similar to last year. So the incremental growth driver main income from certain new markets. We entered into this year. The recently in the fourth quarter last year, such as the Japan, Canada and Malaysia.
Yu Chen: The increase was primarily due to the increase in headcount for general administrative personnel, partially offset by lower professional service fees. As a result, income from operations decreased 9% year-over-year and by 22% QQ to $1 billion. Operating margin declined to 43.1% from 49.1% in the fourth quarter of 2022, mostly due to operating de-leverage.
Thank you.
And David This is Daniel and I will take your question on Japan.
In the fourth quarter, we continued to optimize our account opening process and to integrate the redundant processes and pages in that process and to iterate on the key friction points.
And we have seen therefore, a very meaningful increase in the conversion rate from users to registered clients to paying clients.
Yu Chen: Our net income decreased by 9% year-over-year and 20% in Q2. Our 876 million net income margin shrank to 36.9% in the fourth quarter as compared to 42% in the same quarter last year. Among our international business, Singapore was the first to achieve breakeven on a quarterly basis, even with a portion paused from headquarters. As client assets continue to grow, we believe the unique economics of Singapore will maintain an upward trajectory. That concludes our prepared remarks. We'd now like to open the call to questions. Operator, please go ahead.
But in comparison to other international markets. There is still a lot of room for improvement in that conversion number.
To continue to optimize that account opening golden process will be a key priority for us this year.
And in terms of Japan equities trading guests, we are planning to rollout in Japan equities trading to our Japan clients by the end of March and then in April or May we're going to roll out of Japan equities trading to our clients in Hong Kong and Singapore. Thank you.
Thank you.
We will now take our next question.
And this is from the line of Jeff Wang from Morgan Stanley. Please go ahead.
Good morning, Julien the only other thing you said.
Operator: Thank you. Thank you. To ask a question, you'll need to press star 1 and 1 on your telephone and wait for your name to be announced.
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Operator: To withdraw your question, please press star 1 and 1 again. So once again, that's star 1 and 1 to ask a question. Please stand by while we compile the Q&A roster. Thank you. We'll now take the first question. Stand by.
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Cindy Wang: The first question today is from the line of Cindy Wang from China Renaissance. Please go ahead. Thank you, Ms. Huang, for giving me the opportunity to ask the first question. I have two questions to ask. First, could you please tell us about the current state of the opening and closing of the golden process in Japan and the changes in the fourth quarter and the first quarter? Should we expect that Japanese stocks will be officially listed at the end of the first quarter?
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Cindy Wang: Second, we have seen that the number of new customers in 2024 is estimated to be 350,000. This number is actually higher than expected in the market. Could you please tell us about these big markets, such as Hong Kong, Singapore, Japan, the United States, etc.? I will quickly translate my question. Thanks for taking my call.
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Daniel Yuan: I have two questions. First one is, how is your progress on improving the account opening process in Japan? And could you provide more color on new paying clients acquisition in the fourth quarter last year versus the first quarter this year so far in Japan? And when would you expect to launch Japanese stock trading?
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Daniel Yuan: And the second question is regarding new paying clients. So we see the new paying client target of $350,000 in 2024 is very impressive. Could you break it down by key markets, including Hong Kong, Singapore, the US, Japan, etc. Thank you. Thank you, Cindy.
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Daniel Yuan: I will take your second question first, and I will leave the first question to my colleague, Daniel. In terms of our new targets for 2024, the contributions from Singapore, Hong Kong, and Australia's existing markets, on absolute terms, should be similar to last year. So the incremental growth drivers mainly come from certain new markets we entered into this year, in the fourth quarter last year, such as Japan, Canada, and Malaysia, and I'll take your question on Japan. and to integrate the redundant processes and pages. And we have seen, therefore, a very meaningful increase in the conversion rate from users to registered clients, to paying clients. But in comparison to other international markets, there is still a lot of room for improvement in that conversion rate, and to continue to optimize that account opening golden process will be a key priority for us this year. And in terms of Japan equities trading, yes, we are planning to roll out Japan equities trading to our Japanese clients by the end of March.
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So in the fourth quarter, the Singapore recorded very steady client growth and contribute at about 30% of our total net new clients.
Chiyao Huang: And then in April or May, we're going to roll out Japan equities trading to our clients in Hong Kong and Singapore. Thank you. Thank you. We'll now take our next question. And this is from the line of Chiyao Huang from Morgan Stanley. Please go ahead.
For the entire quarter and thanks to the continued net asset inflows are existing clients and the higher quality new clients. The total client assets and average client assets in Singapore, a record at 25% and 17% sequential growth respectively, and the total client assets are reported sequential increase.
Chiyao Huang: Thank you for the opportunity. I am Daniel Yuan's analyst, Chiyao Huang. I would like to ask you, Mr. Yuan, if you can tell us more about the progress in Singapore, including the number of clients in Singapore and the overall share of client assets in all client assets. In 2024, what new strategies do we have for Singapore?
For every single quarter since we launched the business and average client asset have been on a upward trajectory for six consecutive quarters and as of the end of last year average client assets in Singapore was over 17000, Singapore dollar and we believe that as we continue to enhance our brand awareness.
Chiyao Huang: What changes do we see in the current competitive environment? At the same time, it is also important to understand whether the risk preferences of Singapore's clients have changed. Since U.S. stocks have been strong since last quarter, do they have more willingness to trade stocks and not just buy and sell some funds, etc.?
To diversify and enrich our product offerings and to improve our client services and then we will continue to attract more high net worth individuals and we've also seen the unit economics in Singapore to continue to improve.
The past two years and taking into account the costs from the headquarters to support Singapore.
Our subsidiary.
Broke even for the first time during the fourth quarter and we have some very good growth year to date and in terms of our clients' risk appetite. So during the past rate hike cycle. We started to promote our cash plus product, which is the money market fund product and we continue to cross sell different investment product base.
Li Xu: I will simply translate. For Singapore clients in 2024, the U.S. market is still performing quite well. Are they trading more stocks? Thank you, Chiyao.
Li Xu: My colleague, Robin, will answer this question for you. Sponsored ADR Class A Hello, thank you for your question. Let me answer this question.
Our clients' risk appetite and this year, we have seen very strong traction in U S equities, among our Singapore clients. Thank you.
Li Xu: In the 4th quarter, Singapore's shipping speed maintained steady growth, and Wei Group contributed about 30% of its net assets to customers. This is mainly due to the continuous improvement of net customers' income and new customers' quality. At the end of the 7th quarter, Singapore's total assets and mutual funds respectively achieved 25% and 17% high-speed growth. Since its opening, the total assets have maintained strong growth since the quarter. In addition, the shareholding assets of asset clients have maintained the trend of rising for six consecutive quarters. By the end of the fourth quarter, it had already exceeded 17,000 CNY.
Gotcha. Thank you very much.
Thank you.
We will now take our next question.
This is from the line of Houston from CLSA. Please go ahead.
Okay.
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Li Xu: As our brand credibility in Singapore continues to improve, as well as the continuous improvement of product governance and customer service, Mumu will also gain the trust of more and more high-quality people. The growth of high-quality business has also maintained a relatively good trend. In addition, we have seen that Singapore's economic model has been gradually optimized in the past two years.
Andrew.
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My first question is regarding the blended commission rate, we see the commission rate increases.
Inquiries with culture, so what's the reason behind.
Second question is about cash.
So we see the path to create a lot this call too.
Li Xu: After considering the cost distribution of the headquarters, the Singapore branch company crossed the silver-silver balance point for the first time in the fourth quarter. Since the beginning of this year, we have also seen a very good trend of growth. Another question is about the investment structure and risk preference of our entire Singapore client. Indeed, the window period of the US stock market is mainly focused on our Cash Plus products. With the expected development of Jiangxi, we will also guide some current or future investment products based on the customer layer and customer structure. I think this can all be looked forward to further. , Thank you.
So what's the reason behind and how do you view the future trend of the CAC.
Thank you I will take these two questions while commission rate.
The combined.
Take rate is almost flat Q on Q basis.
Q O Q basis, slightly up because of the product mixture and more contribution from our derivative products.
Then for the CAC.
We further optimized our different marketing campaigns and channels.
To control and even decrease our CIC.
Which pay a very strong result in the fourth quarter, and then looking forward and based on the.
Year to date situations, we do expect this year the CAC number will decrease compared with last year, hopefully by 10% to 20%.
Li Xu: In the fourth quarter, Singapore recorded very steady client growth and contributed about 30% of our total net new clients for the entire quarter. And thanks to the continued net asset inflow of our existing clients and the higher quality new clients, the total client assets and average client assets in Singapore recorded 25% and 17% sequential growth, respectively. And total client assets have recorded sequential increases for every single quarter since we launched the business, and average client assets have been on an upward trajectory for six consecutive quarters. And as of the end of last year, average client assets in Singapore were over $17,000.
On a year basis. Thank you.
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We will now take our next question.
Please standby.
Next question is from the line of MSG from Banc of America Securities. Please go ahead.
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Li Xu: And we believe that as we continue to enhance our brand awareness, to diversify and enrich our product offerings, and to improve our client services, Moomoo will continue to attract more high net worth individuals. And we've also seen unit economics in Singapore continue to improve in the past two years. And taking into account the cost from the headquarters to support Singapore, the Singapore subsidiary broke even for the first time during the fourth quarter, and we have seen very good growth here to date. And in terms of clients' risk appetite, during the past rate hike cycle, we started to promote our cash plus product, which is the money market fund product. And we continue to cross-sell different investment products based on our clients' risk appetite.
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Li Xu: And this year, we have seen very strong traction for U.S. equities among our Singapore clients. Thank you. Thank you very much.
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You Fan: Thank you. We'll now take our next question. This is from the line "You Fan" from CICC.
So I have two questions. The first one is about the <unk>.
You Fan: Please go ahead. Hello, thank you for the question. I'm Fan You, an analyst from ZTE. I have two questions. The first one is about the overall commission rate. We can see that it has improved compared to the previous quarter. I'd like to know why.
Client quality in other international markets, you mentioned earlier about the positive progress in our Singapore client quality.
Other international markets did you also see improvement in the average client asset and for your Hong Kong market with you are penetrating into the mass market, how well the client profile and average client.
You Fan: The second question is about customer cost. We can see that the cost has decreased compared to the previous quarter. I'd like to know why.
You Fan: I'd like to know why and how we can look forward to the future customer cost trend after the new market continues to expand. I'll quickly translate it for you. My first question is regarding the combined commission rate. We saw a commission rate increase this quarter. So what's the reason behind it?
That change and the second question is about your trading velocity of trading volume.
<unk>, let the trading with velocity declined to a record low Ian fourth quarter and it is quite understandable that the Hong Kong trading velocity declined due to the weak market.
You Fan: And the second question is about the CAG. So we see the CAG decrease a lot this quarter. So what's the reason behind it?
Yu Chen: And how do you view the future trend of the CAG? Thank you. I will take these two questions.
U S market actually performed quite well in the fourth quarter U.
Yu Chen: For commission rates, the combined take rate is almost flat on a QRQ basis, slightly higher because of the product mixture and more contributions from our derivative products. Then for the CAC, we further optimized our different marketing campaigns channels to control and even decrease our CAC, which delivered very strong results in the fourth quarter. And looking forward, and based on the year-to-date situations, we do expect this year the CAC number will decrease compared with last year, hopefully by 10 to 20% year-on-year. Thank you. ,, Thank you.
U S trading volume also declined so how should we think about.
Connections between to market performance and your trading volume and you're trading velocity Dorothy.
Notable rebound of your trading velocity.
In the first quarter.
Thank you I will take your second question first and then I'll leave the first question to my colleagues Daniel in terms of trading velocity Youre right. The trading velocities staff in Hong Kong and the U S. In the fourth quarter. Despite the U S. Both performed very well in the fourth quarter, but it will remain.
Operator: Thank you. We will now take our next question. Please stand by.
A very strong continuous uptrend.
Li Xu: The next question is from the line of Emma Xu from Bank of America Securities. Please go ahead. Thank you for giving me the opportunity to ask this question. I also have two questions. The first question is that Singapore, which we have just focused on, is constantly improving the quality of its customers. I would like to ask, how is the quality of our customers changing in other major international markets? Are the mutual assets improving as well? And in the Hong Kong market, as we acquire more offline customers, will the average size of Hong Kong customers' assets change as well? Hello, can you hear me?
For the whole quarter. So most of our clients actually use of buy and hold our strategy to enjoy the rallies and implied volatility in the U S market in the fourth quarter actually went down compared with third quarter. So the trading velocities.
Decrease actually based on our humble observations, yes in line with a lot of other U S discount brokers operating matrix as well then.
In the fourth quarter of this year. So far we have seen a very healthy pick up not only in the U S. But also in Hong Kong in terms of the trading volume and also the trading velocity. Thank you.
Li Xu: The second question is about the volume of transactions. In fact, the volume of transactions fell to a historical low in the fourth quarter, and the exchange rate fell to a historical low. It is understandable that Hong Kong's market is not active because the market situation is really bad. However, the volume of transactions in U.S. stocks also seems to have declined significantly. In fact, the performance of U.S. stocks in the fourth quarter is OK. In the first quarter, U.S. stocks also showed good performance.
Daniel and I will take your question on the client quality and international markets and actually we are.
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Mostly because.
Unlike some of our other peers I think too to really cares about quality growth and net inflows AUR as the key kpis very important kpis for all of our marketing teams across different international regions and in the fourth quarter, we have seen very strong AUM.
Li Xu: So I would like to ask how we should think about the relationship between the exchange rate and market performance. In the first quarter, did we see a significant rebound in the volume of transactions and the exchange rate in the fourth quarter? But how about other international markets? Do you also see improvement in the average client asset? And for your Hong Kong market, with you penetrating the mass market, how will the client profile and average client asset change? And the second question is about your trading velocity and trading volume. The trading velocity declined to a record low in the fourth quarter, and it is quite understandable that Hong Kong trading velocity declined due to the weak market. However, U.S. markets actually performed quite well in the fourth quarter, but your U.S. trading volume also declined. So how should we think about the connection between market performance and your trading velocity?
And flow.
Weak market sentiment and the firm.
First two months this year as leaf mentioned in his opening remarks.
A higher net asset inflow in the first two months of this year than the entire fourth quarter combined and actually over one third of that net outflow inflow comes from international markets.
So we'll expect a continued upward trajectory and our client assets the profit international markets and for Hong Kong.
In the past couple of quarters, we continue to attract older clients, especially with our offline store and we have seen that these clients typically have higher average client.
Average assets, but because of the large phase. The fact, these new clients didn't change the overall client profile much in Hong Kong. Thank you.
Okay.
Thank you this is really encouraging.
Thank you.
We will now take our next question.
This is from the line of Leon Qi from Daiwa. Please go ahead.
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Yu Chen: Do we see a notable rebound in your trading velocity in the first quarter? Thank you. I will take your second question first and leave the first question to my colleagues, Daniel. In terms of trading velocity, you are right. Trading velocity was down in Hong Kong and the U.S. in the fourth quarter.
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Yu Chen: Despite the U.S. stock market performing very well in the fourth quarter, it remains a very strong continuous uptrend for the whole quarters. So most of our clients actually use a buy and hold strategy to enjoy the rallies and imply the volatility in the U.S. markets in the fourth quarter actually went down compared with the third quarters. So the trading velocities decreased.
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Yu Chen: Actually, based on our humble observations, it's in line with a lot of other U.S. discounted brokers operating matrix as well. Then, in the fourth quarter this year so far, we have seen a very healthy pickup, not only in the U.S. but also in Hong Kong in terms of the trading volume and also the trading velocity. Thank you. Thank you, Emma.
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Daniel Yuan: This is Daniel, and I will take your question on declining quality in international markets. Actually, we have seen an improvement in average AUM not only in Singapore but also in our other international markets, including the US, Australia, and Japan, mostly because, unlike some of our other peers, I think Futu really cares about quality growth. And net inflow of AUM is a key KPI, a very important KPI for all of our marketing teams across different international regions. And in the fourth quarter, we have seen very strong AUM inflows despite weak market sentiments. And in the first two months of this year, as Li mentioned in his opening remarks, we had a higher net asset inflow in the first two months of this year than the entire fourth quarter combined. And actually, over one third of that net asset inflow comes from international markets.
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Leon Qi.
Want to ask two questions today, Firstly, it's all while Hong Kong marketing in our client acquisition strategy.
Now management shared a lot of details on Singapore, but I'm interested in Hong Kong now given we have an increasing number of <unk>.
Client base paying client base now with management's view that going forward it will be increasingly.
More difficult for us to acquire new customers are we considering.
Naturally shifting our focus from the number of customers into average.
Or the quality of our customers.
Daniel Yuan: So we'll expect a continued upward trajectory in our client assets across international markets, and for Hong Kong, in the past couple of quarters, we have continued to attract older clients, especially with our offline store, and we have seen that these clients typically have higher average assets, but because of the large phase effect, these new clients didn't change the overall client profile much in Hong Kong. Thank you. Thank you. This is really encouraging.
We do appreciate the new customer guidance that management talked about just now that Hong Kong your customers, though guidance 2008, and 2024 would be similar to 2023 second question is on self clearing in U S stocks.
Confirm that all of our trades in U S. It has already been self cleared.
Operator: Thank you. We will now take our next question. This is from the line of Leon Qi from Daiwa. Please go ahead. Thank you very much for giving me this opportunity to ask questions. I am Li Yang, Qi Xiaoliang.
In addition to the positive impact on our net interest income do we see any improvement in terms of our trading execution efficiencies by using self clearing.
Leon Qi: I have two questions to ask you. Sponsored ADR Class A, Sponsored ADR Class A, Thanks for taking my questions. This is Leon Qi.
Wondering if we can make any comparisons we saw while competitors in the U S. Such as interactive brokers et cetera. Thank you very much.
Leon Qi: I want to ask two questions today. Firstly, it's about our Hong Kong marketing and client acquisition strategy. Just now, management shared a lot of details on Singapore, but I'm interested in Hong Kong now. Given we have an increasing number of client base, paying client base now, would management feel that going forward it will be increasingly more difficult for us to acquire new customers? Are we considering gradually shifting our focus from the number of customers to average AUM or quality? We do appreciate the new customer guidance that management talked about just now that Hong Kong's new customer guidance in 2024 would be similar to 2023. The second question is on self-clearing in U.S. stocks. May I confirm that all of our trades in the U.S. have already been self-cleared. In addition to the positive impact on our net interest income, do we see any improvements in terms of our trading execution efficiencies by using self-clearing?
Thank you Neil.
Let's leave to take the first question I will answer the second one.
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Leon Qi: I was wondering if we could make any comparisons with our competitors in the U.S., such as Interactive Brokers, etc. Thank you very much. Thank you, Leo. Let's go to the first question, and I will answer the second.
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The Hong Kong market is our home base and in 2023, and we continue to maintain very high penetration among the younger clients and we also steadily improve our penetration into clients from other age groups.
Daniel Yuan: , Thank you for the questions. I will answer those questions about Hong Kong. The Hong Kong market is our big winner. In 2023, among the young people in Hong Kong, we will continue to maintain a very high penetration rate. Our population penetration rate at other age groups is also steadily increasing.
As of the end of Q4, our paying client penetration among the adults aged 35 to 55 in Hong Kong was over 10% and in Hong Kong. Our goal is to achieve high quality growth and we focus on acquiring high quality clients and also focus on attracting that.
That said in clarifying existing clients. That's why during Q4 and also in the past where the market sentiments were weak we continue to see very robust net asset inflow from Hong Kong and going forward, well leverage our comprehensive product offerings and have different operational strategies for clients with <unk>.
Daniel Yuan: As of the 4th quarter, the penetration rate of assets customers among the 35 to 55-year-olds in Hong Kong has exceeded 10%. In the Hong Kong market, our goal is high-quality growth; we are focusing on... Sponsored ADR Class A, Sponsored ADR Class A, Sponsored ADR Class A, Sponsored ADR Class A, The Hong Kong market is our home base, and in 2023, we continue to maintain very high penetration among younger clients. And we also steadily improve our penetration into clients from other age groups. As at the end of Q4, our paying client penetration among the adults aged 35 to 55 in Hong Kong was over 10%. In Hong Kong, our goal is to achieve high-quality growth, and we focus on acquiring high-quality clients and also focus on attracting net asset inflow from existing clients. That's why during Q4 and also in the past, when market sentiments were weak, we continue to see very robust net asset inflows from Hong Kong.
Different outlet amount and different investment needs and we will very closely track.
Net asset inflow, China and Hong Kong. Thank you.
For the second question Youre right, we have already largely complete.
The U S self clearing so far and.
I think actually the positive contributions from this.
Migration will continue thanks to the increase the client assets coal and also the contribution from the new markets.
Such as Japan and.
And in Malaysia.
In terms of the operating efficiency.
Definitely after the self clearing capabilities, our service downtime versus before has been a meaningful eight decree.
And also the trading execution in terms of the reporting et cetera will be more smooth.
Thank you.
Thank you very much.
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Yu Chen: And going forward, we'll leverage our comprehensive product offerings and have different operational strategies for clients with different asset amounts and different investment needs, and we'll very closely track the net asset inflow trend in Hong Kong. Thank you. For the second question, you're right. We have already largely completed the US self-clearing so far.
Thank you.
As a reminder, if you would like to ask a question you can press star one and one on your keypad.
We'll now take our next question.
Please standby.
The next question is from the line of Peter Chang from Jpmorgan. Please go ahead.
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Yu Chen: And I think actually the positive contributions from this migration will continue thanks to the increased client assets, coho, and also the contributions from new markets such as Japan and Malaysia. And in terms of operating efficiency, definitely, after the self-clearing capabilities, our service downtime versus before has been meaningfully decreased. And also, the trading execution in terms of the reporting, etc., will be more smooth. Thank you. Thank you very much. Thank you. As a reminder, if you would like to ask a question, you can press stars 1 and 1 on your keypad. We will now take our next question. Please stand by.
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Peter Zhang: The next question is from the line of Peter Zhang from J.P. Morgan. Please go ahead. Thank you for the opportunity to ask questions. I am Peter from Morgan & Dayton. My first question is about interest revenue. The interest revenue in this quarter has dropped slightly. I would like to ask Manager Chen, what is the reason behind this?
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Peter Zhang: Can you please explain to Manager Chen the situation for client-funded funds and the trend of bank deposit interest rates? And I would like to ask what the latest trend was for client-funded funds in the first quarter? My second question is about costs.
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So my first question is about the interest income we noticed that your interest income have been decreased sequentially in the first quarter, we wish to understand what's the fourth quarter trend for clients idle cash and.
Peter Zhang: I would like to ask Manager Chen, is there any guidance on the situation for our high-account support in 2024? And, Manager Chen, is there any guidance on the growth of our costs in 2024 and the change in cost-to-income ratio? Let me translate. My first question is about interest income. We noticed that interest income has decreased sequentially in the first quarter.
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Yu Chen: We wish to understand what the fourth quarter trend for clients' idle cash and Futu's deposit rates are. I also wish to understand what the trend was for the first quarter for clients' adult cash balances. My second question is about operating expenses.
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Yu Chen: I wish to understand what Futu's plan for the headcount increase in 2024 and what management's guidance for Futu's operating expense increase or, say, cost of income ratio trend. Thank you. Thank you, Peter. I will take these two questions. For EIDL cash, roughly EIDL cash accounts for 10% to 15% of our total client assets in the past quarter and also similar situations happened in the first quarter so far. The decrease in the interest revenue in the fourth quarter, as I mentioned in the open remarks, is mainly due to the decrease in the average balance decrease for the security lending and the lending. Despite, if you see the balance sheet date, the margin and the security lending balance were higher than that in the third quarter.
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Operating expense increased I'll say cost income ratio trends. Thank you.
Thank you Peter I will take these two questions.
For idle cash roughly the Idaho cash account for 10% to 15% of our total client assets.
In the hospital walls in the past quarter and also the similar situations happened in the first quarter, so far and the decrease of the interest.
Revenue in the fourth quarter as I mentioned in the in the opening remarks is mainly due to the decrease of the average balance decrease.
The security borrowing in the lending despite.
If youll see the balance sheet date.
And the security lending balance was higher than that.
Yu Chen: Then for your second half questions, in terms of head accounts, we are looking for mid to high single-digit head account growth, which will mainly be deployed for our international market expansion and further enhance our R&D capability. Unfortunately, we do not have a cost-income ratio guidance given the nature of our business. Our revenue is very volatile, and it is very difficult to predict due to market volatility. So we were more focusing on the people side, given this is one of the largest cost components of our overall cost structure.
In the third quarter than for the for your second half questions in terms of how the cost we are looking for mid to high single digit.
Helicon growth, mainly will be deployed for our international market expansion and further enhance our R&D capabilities.
Fortunately, we do not have a cost income ratio guidance given the nature of our business. Our revenue is favorable with higher it's very difficult to predict due to the market volatility so.
We will more focusing on the on.
On the people side given this is one of the largest.
<unk> cost components, while all overall cost structure. Thank you.
Peter Zhang: Thank you. Thank you. Very clear.
Daniel Yuan: Thank you. Thank you, and this does conclude the question and answer session. So, at this time, I would like to hand the conference back to Daniel Yuan for closing remarks. Thank you. 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. Thank you. This does conclude today's conference call. Thank you for participating, and you may now disconnect.
Sure.
Thank you.
Thank you and this does conclude the question and answer session. So at this time I would like to hand, the conference back to Daniel Yuan for closing remarks. Thank you.
That concludes our call today on behalf of the <unk> 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 representative Thank you and goodbye.
Thank you and this does conclude today's conference call. Thank you for participating and you may now disconnect.
Operator: You Fan, Li Wan, Futu Holdings Ltd. Sponsored ADR Class A: You Fan, Li Wan, Futu Holdings Ltd. Sponsored ADR Class A
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