Hello, ladies and gentlemen. Welcome to Futu Holdings Fourth Quarter and Full Year 2020 Conference Call. [Operator Instructions] I would now like to turn the conference over to your host for today’s conference call, Mr. Daniel Yuan, Chief of Staff and Head of IR at Futu. Please go ahead, sir.

Thanks, operator and thank you for joining us today to discuss our fourth quarter and full year 2020 earnings results. Joining me on the call today are Mr. Leaf Li, Chairman and Chief Executive Officer; Arthur Chen, Chief Financial Officer; and Robin Xu, Senior Vice President. As a reminder, today’s call may include forward-looking statements, which represent the company’s belief regarding future events, which by their nature are not certain and are outside of the company’s control. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. More information about the potential risks and uncertainties, please refer to the company’s filings with the SEC, including its registration statement. With that, I will now turn the call over to Lee. Lee will make his comments in Chinese and I will translate.

[Foreign Language]

Hello, everyone. Thank you for joining the earnings call today. We are excited to announce that the robust growth momentum of our operating and financial matrices continued into the fourth quarter of 2020 and we ended the year on a high note.

[Foreign Language]

We added over 98,000 paying clients on a net basis, over half of whom were from Hong Kong and overseas. We are pleased to see that our relentless commitment to user experience continue to payoff as we again brought in over 50% of our new paying clients in the quarter through organic growth. As of year end, paying clients reached over 516,000, representing 160.5% year-over-year growth. We exceeded our full year paying client guidance by adding approximately 320,000 paying clients in 2020. At the same time, we continue to deliver a high paying client quarterly retention rate of 97.9% in the quarter. Looking into 2021, we are guiding for 700,000 net new paying clients, translating to 135% year-over-year growth in total paying clients.

[Foreign Language]

By the end of fourth quarter, average client asset balance was HKD552,000, a record high since our IPO, bringing our total client assets to HKD285.2 billion, representing 227.3% growth on a year-over-year basis and 41.9% growth on a quarter-over-quarter basis.

[Foreign Language]

Total trading volume was HKD1.2 trillion in the quarter, a 438.1% year-over-year and 19.2% quarter-over-quarter. U.S. stock trading was HKD783.6 billion or 65% of our total trading volume, underpinned by the robust U.S. equities market performance. In Hong Kong, we continue to aggressively take market share in terms of both paying clients and trading volume. The market share of our Hong Kong trading volume was over 2.6% in the quarter, which more than doubled from the year ago quarter. In the fourth quarter, we further expanded our trading product offerings by launching CME futures and A50 futures.

[Foreign Language]

By year end, total client assets in Money Plus surpassed the HKD10 billion milestone up 68.5% year-over-year. We have established partnerships with 39 asset managers around the world, which altogether hosted 39 live streaming on our platform in 2020 to conduct fund publicity and investor education. In the fourth quarter, we saw growing number of clients capture the market by investing in equity funds, among which funds with a focus on the technology sector and the Greater China region gains the most traction. Over 42,000 clients or 8.1% of our total paying client base helped net wealth management positions as of year end, offering significant room for further penetration.

[Foreign Language]

Futu I&E continues to be the go-to-enterprise service partner. We had a 105 IPO and IR clients as of year end. In the fourth quarter, 10 IPOs recorded over HKD10 billion in subscription respectively on our platforms, including the U.S. IPOs of Miniso and Lufax and the Hong Kong IPOs of Pop Mart and JD Health. We also added 33 ESOP clients in the quarter, bringing our total ESOP client number to 159.

[Foreign Language]

We continue to invest in our technology infrastructure. Despite heightened market volatilities in 2020, we still achieved a full year service availability rate of 99.96%. In January 2021, we further expanded our throttle rate for Hong Kong stock trading from 200 to 500, thereby allowing us to execute 1,000 concurrent Hong Kong stock orders per second. Technological excellence is deeply entrenched in every aspect of our business and we will continue to invest in technology to widen our competitive mode.

[Foreign Language]

For Futu, 2021 is the year of internationalization. We officially launched our Moomoo app in Singapore on March 8 and have since then seen strong growth momentum and received encouraging feedback. We believe that our product and service delivered differentiated value proposition in many more markets outside of Mainland China and Hong Kong and we wanted to take advantage of the elevated retail stock market participation around the world.

[Foreign Language]

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

Thanks, Leaf and Daniel. Let me walk you through our financial performance. All the numbers are in Hong Kong dollars unless otherwise noted. In the fourth quarter, our total revenue was HKD1.2 billion, an increase of 282% from HKD311 million in the fourth quarter of 2019. To break it down, brokerage commission and handling charge income was HKD718 million, an increase of 374% from the HKD152 million in the fourth quarter of 2019. The rise was mainly due to the 438% year-over-year growth of our total trading volume. Interest income was HKD337 million, an increase of 163% year-over-year. We generate higher margin financing interest income due to the sharp increase in daily average margin financing balance and higher IPO financing interest income due to a very active Hong Kong IPO market. Other income was HKD131 million, an increase of 318% from HKD31 million in the fourth quarter of 2019. The jump was primarily due to a increase in our IPO subscription service charge income and the currency exchange service income. On the cost side, total costs were HKD242 million, an increase of 179% from HKD87 million in the fourth quarter of 2019. Brokerage commission and handling charge expenses were HKD133 million, an increase of 323% year-over-year. This growth was largely in line with our brokerage commission and handling charge income growth. Interest expenses were HKD64 million, an increase of 160% year-over-year. The increase was primarily due to higher IPO financing interest expenses. Processing and service costs were HKD45 million, an increase of 79% year-over-year. The growth was primarily due to an increase in cloud service fees. As a result, total gross profit was HKD944 million, an increase of 321% from HKD224 million in the fourth quarter of 2019. GP margin increased from 72% in the fourth quarter of 2019 to…

Certainly. [Operator Instructions] We have the first question from the line of Xinhe Liu from Morgan Stanley. Please go ahead.

I will translate for myself. First, the question is for Chairman Li. Just wondering in the future, 3 to 5 years, how do you see Futu different from now? And second question is about just another guidance given on the paying clients. Just now the guidance for paying clients is around 700,000 addition for 2021, just wondering does 700,000 include the clients of Futu Moomoo or it’s just Futu NiuNiu? Thank you very much.

[Foreign Language]

In 3 to 5 years, a little long in comparison to how we plan our business. And I think our business will evolve in three aspects. And number one, you will see Futu as a more international platform. And as we mentioned just now, internationalization is a key priority for us this year and in the years to come. And number two, I think we will further go down our path of constructing self reinforcing ecosystem in our platform that provides connectivity to users, investors, KOLs, media, etcetera. And number three, I think our Futu Money Plus, which is our wealth management business, will contribute larger asset balance and also revenue to our total business.

[Foreign Language]

And to your second question the 700,000 net new paying client addition this year includes our Moomoo paying clients. So, we expect that among these 700,000 new paying clients, about 80% of them will come from Mainland China and Hong Kong and the rest will come from Singapore and the U.S.

Thank you.

Can we move to the next question?

The next question comes from the line of Zeyu Yao from CICC. Please go ahead.

Hi, management. Thanks for taking my question. I am Zeyu Yao from CICC. Congratulations on the exciting results. I have two questions here. And the first one is about the revenue breakdown. We see the other income has experienced strong growth. And I wonder, would you please give us more information on the breakdown? And the second question is about the client assets. I noticed that the average client asset balance has increased significantly on a quarterly basis. I remember that the average asset balance of our overseas clients is much lower than that of our mainland customers. So would you please give me more information about the difference between different regions? Thank you.

Thank you, Zeyu. I will answer your two questions. I think, number one, in terms of breakdown income, the most part of our other income still come from our IPO subscription service charge and also the currency exchange service charge. The things you mentioned, such as the ESOP business revenue and also the wealth management revenue is still not very, very meaningful. We will give you the detailed breakdown in our forthcoming annual report, which may be due in the later days of this month. And secondly, for the average client assets, you are right. If we compare our mainland client assets and also the Hong Kong line assets, roughly on average, our average client assets for Hong Kong market will be around the 20% to 25% lower than the average numbers of the mainland numbers. We have not conducted our client acquisition in Singapore in the last Q4. So actually, we do not have such data on hand yet. And also, we have not included our U.S. clients numbers in fourth quarter as well. We will give you more information in the coming Q1 earnings call. Thank you.

Thank you, Arthur.

Thank you. The next question comes from the line of Jacky Zuo from China Renaissance. Please go ahead.

Thanks management for taking my questions. I have two questions. Number one is about our guidance. So I think the 700,000 new paying clients guidance exceeding most market expectations. So just want to check what is the current run rate of our paying – new paying clients as in the first quarter? And what do you – what is our expectation for the speed of customer acquisition in different regions over the year? And second question is about our U.S. self-clearing programs. So what will be the launch time for the U.S. self-clearing? And according to our last earnings call, we mentioned there is probably $50 million pretax benefit from U.S. self-clearing. So when will we see the impact on the financial results? Thank you.

Okay. Thank you, Jacky. I will leave to answer your first question in terms of giving some qualitative updates about year-to-date situations. Frankly speaking, we cannot share any quantitative numbers about year-to-date run rate, which I think will give you more color during our first quarter earnings call. For your second question, I will answer it first. In terms of self-clearing, actually, we just started our initial migration recently just to overcome the gross profit, but we do think this migration will take time. You will see meaningful progress in terms of operation numbers, i.e., the clients’ assets and the number of the clients from our counterparty in the U.S. to our self-own clearing house this year. But I think that, in terms of financial savings, it will not be too meaningful in terms of 2020 contributions. But definitely, you will see the benefit from the second half of next year.

[Foreign Language]

So, first of all, I think Leaf supplemented on to your second question on self-clearing. He mentioned that 2 weeks ago he used his own personal account to execute 5 trades, which are processed through our own clearance system and the trades were processed very successfully. And as Arthur mentioned, we will start this migration process starting in the second quarter. And I will take your first question on our guidance and our run rate. So year-to-date, the numbers have been really strong. The paying client growth has been strong, and it gave us simple confidence to give out this guidance of 300,000 net new paying client addition this year. I think we are well on track. And as we mentioned earlier, among this 700,000 new paying clients, about 80% of [indiscernible] come from Mainland China and Hong Kong and 20% will come from the U.S. and Singapore. I think it’s a little too early to give out a more detailed breakdown further down what I just mentioned. But I think in terms of run rate, maybe I can talk a little bit about our business updates year-to-date. As we mentioned in Singapore, we launched in February, and we officially launched our business on March 8. And if you look at some of the rankings on the app stores in Singapore, you will see that we have really strong downloads, and our business has been growing really strong and kind of exceeding our expectations. So we are very confident about our growth prospects in Singapore. And also the strong growth momentum is also observed in the U.S. market as well. And in Mainland China and Hong Kong, I think the growth momentum is strong as always, and we see that there is a very strong IPO pipeline this year. And if I remember correctly, in the first 2 months of this year, the total proceeds raised through Hong Kong IPOs totaled a little over HKD70 billion. And in the first quarter of last year, in total, the IPO proceeds was a little over HKD10 billion. So the IPO market is very active. The market sentiment is very positive. And we are continuously expanding our Hong Kong stock trading market share. And in February this year, I think our DAU surpassed HKD1 million for the first time, and that’s also one of our major accomplishments in establishing our social community and just creating this ecosystem. Thank you.

That’s clear. Thank you.

Thank you. We have our next question from the line of Zoey Zong from Jefferies. Please go ahead.

Hi, management. Thanks for taking my questions. This is Zoey from Jefferies. I have two questions. First, could you please provide some color about the brokerage commission and handling charge income from U.S. stock, Hong Kong stock and stock, respectively? And how should we think about the trend in the commission fee rate in different markets? My second question is, how should we think about the commission and handling income contribution from the Singapore market and our strategy in other overseas countries? Thank you.

Okay. Thank you, Zoey. Let me answer your two questions. I think number one, in terms of the trading volume, just to give you some breakdown in terms of our fourth quarter trading volume, U.S. markets roughly accounts for 65% of our total trading volume. The remaining 34% came from the Hong Kong local market. And we have a very tiny portion from the Hong Kong China spot connect as well. If you look at our blended commission rate, Q-on-Q wise, it keeps very, very stable. If we take out some fluctuation due to the IPO and also the U.S. trading, because our U.S. stock commissions – actually some of our U.S. trading commissions based on the number of the shares rather than a blended percentage calculations. So, on a like-for-like basis, our commission rates keep very stable. And I do think such stability will continue towards this year. And also in terms of commission contribution from the Singapore market this year, I think the proportion wise, it will not be very meaningful because they are still a growth learning curve in the Singapore market. And also, in order to penetrate the market more quickly and more aggressively, actually, we adopt a lot of commission-free strategies because we think in the current stage, market share is far more important than the modernization from the trading commission.

That’s very helpful. Thank you.

Thank you.

Thank you. We have our next question from the line of Yiran Zhong from Credit Suisse. Please go ahead.

The first is following up on your paying client guidance of 700,000 net new paying clients for 2021. Of those 80% of – from Hong Kong and Mainland, what’s the expected contribution from Mainland China versus Hong Kong local? On Singapore, specifically, what’s the marketing strategy for that market? And how should we think about the customer acquisition costs going forward? Thank you.

[Foreign Language]

To your first question on breakdown, as we mentioned, 80% of our new clients will be from Mainland China and Hong Kong. And among those 80%, we think that about 60% will be from Hong Kong and the rest from Mainland China. And to your second question on the Singapore market, based on our own observations, competitive landscape in Singapore is very similar to that in Hong Kong. There is a relatively large retail investor base that is relatively wealthy. And the market is also dominated by the incumbent players that have lackluster trading technology capabilities and have less than an optimal user experience. And for Q2, I think our client acquisition channels will be very similar to the channels in Hong Kong, including online and offline marketing, working with third-party channel partners, working with KOLs and also organic growth.

[Foreign Language]

We expect our per paying client acquisition costs in Singapore to be around HKD2,000. So that’s our estimate based on 1 month of experience of actually launching in the Singapore market. And we believe that as our user growth pivot, per paying client acquisition costs has imploring to go down. Thank you.

That’s very clear. Thank you.

Thank you. [Operator Instructions] If there are no further questions, I would like to hand the call back to Daniel. Over to you, sir.

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 representative. Thank you, and goodbye.

Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for participating. You may all disconnect now. Thank you.