Futu Holdings Aktie

Gentlemen, welcome to Futu Holdings Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference 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, Michelle Li, Investor Relations Manager at Futu. Ma'am, please go ahead.

Thanks, operator. Thank you for joining us today to discuss our second quarter 2026 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.

For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC, including its annual report. And with that, I will now turn the call over to Leaf. Leaf will make his comments in Chinese, and I will translate.

Thank you all for joining our earnings call today. In the second quarter, we acquired 252,000 net new funded accounts, up 23.7% year-over-year and 12.2% quarter-over-quarter. Total funded accounts reached approximately 3.84 million, representing an increase of 33.6% year-over-year and 7% quarter-over-quarter.

Client acquisition in Hong Kong accelerated sequentially during the quarter, supported by a robust local IPO pipeline and strong performance in U.S. equities. In Singapore, registered users surpassed the 2 million milestone, further solidifying our leadership among local retail investors. The average revenue per new client in both markets improved sequentially, underpinned by our ongoing investor education initiatives across multiple asset classes, reinforced by our sustained investment in brand equity.

In Malaysia, our targeted marketing campaign centered around local IPOs and the AI-driven rally catalyzed a record quarter of client acquisitions, leading all markets in net new funded accounts for the third consecutive quarter. In the U.S., moomoo's prediction markets garnered significant traction, driving incremental new client acquisition and helping improve overall client engagement on our platform.

As of quarter end, total client assets stood at HKD 1.4 trillion, up 43.6% year-over-year and 14.5% quarter-over-quarter. The growth was mainly attributable to higher market valuation of client stock holdings and to a lesser extent, net asset inflow. Period-end merchant financing and securities lending balance rose 31% quarter-over-quarter to HKD 95.1 billion, supported by an active Hong Kong IPO market, along with broader positive market sentiment that encouraged clients to take on more leverage.

Thanks to favorable market conditions, total trading volume rose 78.8% year-over-year and 54.6% quarter-over-quarter to HKD 6.42 trillion, setting a new record high. U.S. stock trading volume grew 67.2% sequentially to HKD 5.02 trillion, driven by client interest in AI-related names. Hong Kong stock trading volume increased by 15.9% quarter-over-quarter to HKD 1.17 trillion, largely attributable to heightened trading activity in semiconductor, China Internet and newly listed companies.

In June, Futu Securities became the first and to date only broker in Hong Kong to launch securities-backed margin financing for virtual assets under an upgraded type 1 license approval from the SFC. We are also exploring extending our unified buying power framework to cover virtual asset holdings, further enhancing capital efficiency across traditional and digital asset markets.

Wealth Management client assets were HKD 180.2 billion, up 10% year-over-year and 1% quarter-over-quarter. During the quarter, we observed a shift in client preference from money market funds towards equity funds on the back of strong equity market performance. In Hong Kong, we held our first offline fund roadshow for retail investors centered on the commercial space theme. Amid heightened investor interest, the event drew a full on-site audience and several hundred live stream participants, translating into meaningful follow-on subscriptions.

We concluded the quarter with 683 IPO distribution and IR clients, up 32% year-over-year. The Hong Kong IPO market sustained strong momentum in the second quarter with nearly 60% of newly listed companies choosing to partner with Futu. We served as joint book runners for multiple high-profile listings, including those of Star Sports Medicine, Lightelligence and Metis TechBio.

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

Thank you, Leaf and Michelle. Please allow me to walk you through our financial performance in the second quarter. All the numbers are in Hong Kong dollars, unless otherwise noted. Total revenue was HKD 7.2 billion, up 36% from HKD 5.3 billion in the second quarter of 2025. Brokerage commission and handling charge income was HKD 3.4 billion, up 30% year-over-year and 27% Q-o-Q. Total trading volume grew on both year-over-year and a Q-over-Q basis, while blended commission rate declined due to stronger trading activities in higher-priced U.S. stocks and options during the quarter.

Interest income was HKD 3.1 billion, up 37% year-over-year and 18% Q-o-Q. Both the year-over-year and Q-o-Q increase was mainly driven by higher interest income from margin financing, bank deposits and security lending. Other income was HKD 718 million, up 61% year-over-year and 27% Q-o-Q. Both year-over-year and the Q-over-Q increase was primarily driven by higher currency exchange income and IPO financing service income. Our total costs were HKD 985 million, up 47% compared to the second quarter of 2025. Brokerage commission and handling charge expenses were HKD 248 million, up 54% year-over-year and 50% Q-over-Q. Both the year-over-year and the Q-over-Q increase was mainly due to higher trading volume.

Interest expenses were HKD 513 million, up 36% year-over-year and 24% Q-over-Q. Both the year-over-year and the Q-over-Q increase was mainly driven by higher interest expenses associated with our margin financing business. Processing and servicing costs were HKD 225 million, up 70% year-over-year and 32% Q-over-Q. Both the year-over-year and Q-over-Q increase were primarily driven by higher product service fees. As a result, total gross profit was HKD 6.2 billion, an increase of 34% from HKD 4.6 billion in the second quarter of 2025. Gross margin was 86.3% as compared to 87.4% in the same quarter of 2025.

Operating expenses were HKD 1.8 billion, up 35% year-over-year and 11% Q-o-Q. To break it down, R&D expenses were HKD 501 million, up 13% year-over-year and 5% Q-over-Q. The year-over-year and Q-over-Q increase was primarily driven by the increased investments in strategic initiatives like AI and Web 3. Selling and marketing expenses were HKD 657 million, up 53% year-over-year and 18% Q-o-Q. The year-over-year and Q-over-Q increase was mainly driven by the increase of new fund accounts. G&A expenses was HKD 593 million, up 40% year-over-year and 10% Q-over-Q. The year-over-year increase was primarily due to an increase in G&A personnel and professional fees. As a result, income from operations was HKD 4.5 billion, up 34% year-over-year and 26% Q-over-Q. Operating margin of 62% is largely flat compared to the second quarter of 2025.

Our net income increased by 42% year-over-year to HKD 3.6 billion. Net income margin expanded to 50.6% in the second quarter compared to 48.4% in the same quarter last year. Our effective tax rate for this quarter was 16.1%.

That concludes our prepared remarks. We'd now like to open the call to questions. Operator, please go ahead.

[Operator Instructions] Our first question is going to come from the line of Emma Xu with BofA Securities.

[Foreign Language]

Congratulations on the strong second quarter results. Since the release of the new regulations on May 22, have you seen material changes in Mainland client share account across funded account, AUM and revenue contribution? Have you observed meaningful outflow of accounts or client assets? The second question is against the regulatory backdrop, the group delivered resilient revenue and profit in the second quarter. So could management please share an update of the overseas market development and their contribution to the group?

[Interpreted] I will translate for Leaf. So Futu places very strong emphasis on the compliance, and we are committed to meeting all of the applicable regulatory requirements. So following the release of the new rules, we promptly implemented the relevant compliance measures, and we have maintained ongoing communication with the regulators. As for the cumulative asset outflows since the new regulations, the outflows were about mid-single-digit percentage of our total client assets. And we believe the bulk of the impact has already been absorbed in Q2. And the outflows came from both our Mainland and Hong Kong client base, and the 2 are roughly about the same.

The Mainland outflows were primarily compliance-driven adjustments under the new rules, while the Hong Kong outflows were more concentrated in the early period right after the announcement, which reflects some risk-off sentiment as the market digested the news. And most of the Mainland client outflows happened in June, July after we implemented the restrictions on our app. And the pace of client attrition started to moderate in August. And for Q2, our Hong Kong client retention rate stayed above 98% and the retention across our overseas market remained stable quarter-over-quarter. And we continue to see steady growth in overseas new client additions. And going forward, we'll keep directing our resources and the growth focus towards advancing our international business.

On the quality of new newly funded accounts, the average revenue per newly funded accounts improved sequentially across multiple markets in the overseas, in particular, like U.S., Singapore and Hong Kong, all posted double-digit growth. We think this both reflects a structural upshift in fund account quality in growing markets like U.S. and also continued acquisitions of higher-value clients in mature markets like Hong Kong and Singapore, together supporting overall revenue growth.

Then on the client asset perspective, all fund accounts in overseas markets, including Malaysia, Australia, New Zealand and Canada grew double digits sequentially in second quarter. And actually, the average client assets rose Q-over-Q across every overseas markets we have the operations, showing that we are growing not just in the number of clients, but also the wallet share. our recent securitizations of the Thailand license also give us a very additional important anchor for our ASEAN footprint down the road.

In terms of profitability, our overseas markets are at different stage of maturities. For instance, Singapore has already passed breakeven a couple of years ago. And the absolute level and also the net profit margin continue to expand, thanks to the operating leverage benefit kicking. And I'm also very happy to share Malaysia has recently achieved a breakeven in the operation levels as well. While our other overseas markets are still building out their client and asset base, rising average client assets and the client retentions, we think the groundwork for our long-term profitabilities for the overseas market will be very likely. Thank you.

Our next question will come from the line of Chiyao Huang with Morgan Stanley.

Let me briefly translate. The first question is regarding the Thailand. What's the strategic thinking about choosing this market? And when do we expect Futu to officially launch the business here? And do we see any synergy among in the ASEAN market we are already in? And second question is about the commission rate, which is dropping a little bit Q-on-Q. So what kind of structural changes we're seeing behind this drop?

I will translate. So Thailand is the third largest economy in Southeast Asia. And the local investors there are quite digitally savvy with growing demand for global asset allocation as well as digital investing tools. And according to the Stock Exchange of Thailand, as of the first half of 2026, over 4.5 million investors had opened accounts online. So for moomoo, entering Thailand is really a natural next step in the Southeast Asia market after Singapore and Malaysia. And it allows us to leverage the infrastructure and the operations that we have already built in that region.

So moomoo has already obtained the Type A securities license from Thai SEC. And combined with our licensed operations in other overseas markets, this reflects the ongoing recognition from regulators of our ability to operate compliantly across multiple jurisdictions and the overall pace of our overseas expansion remains steady. And as for the timing of the official launch, we still need to go through the regulators' readiness and inspection to receive final approval. So we don't really have a specific time line to share at this point. We'll continue to work closely with the local regulator and make sure all the prelaunch preparations are thoroughly in place.

First, there was no any price menu change in the second quarter across all of our markets. So the take rate change Q-on-Q is mainly driven by our customers' behavior. Number one is the contribution from the derivative in the second quarter compared with the first quarter slightly down Q-o-Q. But on the absolute levels, the contribution is still very healthy. Secondly is more clients are trading the U.S. stocks in the second quarter with a very high concentration on some high-value AI SIEMs and the tech leading names, which led our implied commission rate down a little bit. Thank you.

Our next question is going to come from the line of Charles Zhou with UBS.

So first of all, congrats to the management on the very excellent results and also I think also a strong beat to the market consensus. This is Charles Zhou from UBS. And I have 2 questions. First, can we maybe get some color on the trajectory of your C-A-C, CAC in the second quarter? And what the key drivers were should we think about the CAC in the coming quarters?

My second question is also, could you maybe provide some breakdown on the newly added funded accounts and the period-end funded accounts by markets, in particular, the contribution mix from your overseas markets?

So in the second quarter, the blended CAC rose sequentially to around HKD 2,600, which is still within our full year guidance range of HKD 2,500 to HKD 3,000. And the quarter-on-quarter increase in CAC for Q2 was mainly driven by the relatively lower net new funded accounts as a result of the regulatory development. And at the same time, we maintained a certain level of brand investment to support the long-term growth and the higher client lifetime value across our markets. And additionally, the CAC trended higher in July relative to Q2.

Malaysia has led all markets in terms of new fund accounts growth for 3 consecutive quarters, followed by Hong Kong. Together, these 2 markets make up for more than 50% of net new fund accounts acquired in this quarter with Singapore being the next largest source among the remaining markets. By the end of the second quarter, moomoo's share of total fund accounts has increased to nearly 60%, led by Singapore, Malaysia and the U.S. Thank you.

Our last question is going to come from the line of You Fan with CICC.

Congratulations on the outstanding results. This is You You Fan from CICC, and I have 2 questions here. Firstly, would you please share more color on our Q3 trend such as the run rate of the new funded accounts, the trade flow and also the client AUM? Secondly, since moomoo has launched the prediction market in the U.S., can you share more on this business trend? And how do you view the future monetization and growth opportunities of prediction markets? These 2 questions.

So on the Q3 quarter-to-date run rate basis, our key metrics are trending modestly softer against the backdrop of market volatility. So the net addition of funded accounts moderated compared with Q2. And as for net asset inflow, so in Hong Kong and our overseas markets, net asset inflows have returned to a normalized level. And as for the trading volume, so total trading volume was down modestly sequentially. So this is primarily reflecting accruing of the retail sentiment in the Q3 quarter-to-date relative to the previous quarter.

We got the license in May from FCM license from CFTC and moomoo U.S. officially launched the protection market trading service for our retail clients in the U.S. in early June. The number of the event contracts, as Leaf mentioned in the opening remarks, trade exceed $200 million within 1 month of the launch, reflecting a very strong demand from the U.S. retail investors for prediction markets products. And the event contracts has delivered great results in our observation in both acquiring new clients and driving engagement with clear cross-sell synergy with our core brokerage business.

For instance, users who trade event contracts are more active in security trading, showing that event contracts are not a substitute for security trading, but rather a driver of it. The purpose for our U.S. production market rollout, I think, serves 2 purposes. Number one is definitely to capture the near-term opportunity as production markets took off locally. But more importantly, it let us build up the product design, operational and risk management expertise that will support our ability to bring prediction markets to other regions we have the operation down the road. Thank you.

Thank you. And I would now like to hand the conference back over to Michelle Li for closing remarks.

So that concludes our call today. And on behalf of the Futu management team, I would like to thank you all 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.

Hello, ladies and gentlemen. Welcome to Futu Holdings First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Today's conference is being recorded.I would now like to turn the conference over to your host for today's conference call, Alan Cui, Investor Relations Manager at Futu. Go ahead, sir.

Thank you for joining us today to discuss our first quarter 2026 earnings results. Joining on the call today are Mr. Hua 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 on side of the top culture. 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. 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 in Chinese, and I will translate.

[Foreign Language]

[Interpreted] Thank you all for joining our earnings call today. In the first quarter, we added 225,000 net new on the account bringing our 2 funding accounts to HKD 3.59 million, up 34% year-over-year and 7% quarter-over-quarter. Although subdued [indiscernible] markets with our plan acquisition, to still contributed to cyclized new account addition among all regions. We remain confident about sustained client growth in Humco. Looking ahead, we will focus more on the growth of client assets, and lifetime value, leveraging our strength in product innovation, brand trust and one-stop platform to first [indiscernible] the commercial potential of the focal market.

[Foreign Language]

[Interpreted] Singapore delivered double-digit sequential growth in net new funding accounts. Over the past 3 years, average [indiscernible] in Singapore grew at a CAGR of more than 50%. Given the balanced profile of local residents, we continue to see significant room for further asset growth in sample Malaysia led on market in client addition for another quarter, thanks to our effective marketing initiatives around U.S. equity as well as 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 breakeven within the next 6 to 12 months.

[Foreign Language]

[Interpreted] In Japan, our superior U.S. equity trading capability continued to drive client acquisition. In the first quarter, U.S. stock trading volume in Japan recorded double-digit conquercial 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 online play approval to operate a prediction market brokerage business and will soon begin offering even contracts, including for related products to local investors for the strengthening better proposition to active traders.

[Foreign Language]

[Interpreted] Fund engagement strengthened on the back of precious metal market oldies and geopolitical tension leading to the second highest quarterly net asset inflow on record. However, mark-to-market losses in client equity holdings exerted a substantial negative impact. To decline [indiscernible] that removed flat quarter-over-quarter, yet up 47% year-over-year. Transat recasted double-digit sequential growth in Japan, Australia and Canada, and the average plan effect across the 3 regions also reached all-time highs and scoring improving client quality, rising with [indiscernible] through margin financing and security lending balance up 8% sequentially to HKD 72.9 billion at quarter end.

[Foreign Language]

[Interpreted] Studer trading volume reached a record TWD 4.15 trillion up 29% year-over-year and 4% quarter-over-quarter. U.S. stock trading volume remained broadly stable at HKD 3 trillion. AI continues to be the dominant investment team. with client interest, gradually shifting down the value chain from semiconductor names towards AI infrastructure beneficiaries. [indiscernible] stock trading volume rose 22% sequentially to HKD 1 trillion, a heightened market volatility drove stronger bottom fishing activities. A trading in China technology and newly listed AI rigid company more than compensated for softer momentum in the consumer sector. Thank you.

[Foreign Language]

[Interpreted] In March, Panda Trade officially obtained second phase approval for the Hongkong SSBT license and commenced food operations. First launch, a portion of Fuji Security's crypto trading volume and AUM has migrated to penetrate. Looking ahead, we plan to introduce security-backed market financing for [indiscernible] in Hong Kong to further enhance capital efficiency across costs. At the same time, we will continue to expand the capability of our crypto exchange, including OTC trading, broader [indiscernible] support and taking services. We are also actively exploring new institutional service use cases with the goal of making penetrate a key infrastructure within the Hong Kong VAC3 ecosystem.

[Foreign Language]

[Interpreted] Puren wealth management plan assets were HKD 178.4 billion, up 28% year-over-year and broadly stable quarter-over-quarter. In the first quarter, [indiscernible] asset allocation partly located from money muteins into equity funds amidst improving risk advertise. In response to evolving client demand, we further expand our transaction. In Hong Kong, we became one of the first brokers to offer space economic in mutual funds. While in simple, we do our local [indiscernible] and the MES equity market development program. We also launched Gold and oil-linked structure notes and onboarding new issuers due to retail subscribers for structured products doubled sequentially.

[Foreign Language]

[Interpreted] As of quarter end, we served 625 IPO distribution and IR, up 26% year-over-year. In the first quarter, 12 IPOs each saw over HKD 100 billion in subscription loans on our platform. While it issuers appointed us as overall coordinators for their [indiscernible] colistin and scoring our strong distribution and underwriting capabilities. During the quarter, we also acted as joint book runner for several prominent, including those of AI, Midmax and Biden technology. Next, I'd like to invite our CFO, Arthur, to discuss our financial performance.

Thank you, Leaf 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 HKD 5.9 billion, up 25% from HKD 4.7 billion in the first quarter of 2025. Blockage commission and handling charge income was HKD 2.6 billion, up 14% year-over-year and down 5% Q-o-Q. Total trading volume grew on both year-over-year and Q-o-Q basis. while blended commission rate declined due to stronger trading activities in higher priced U.S. stocks and auctions during the quarter.

Interest income was HKD2.7 billion, up 28% year-over-year and down 13% Q-o-Q. The year-over-year increase was mainly driven by higher interest income from margin financing and the bank deposits, while the Q-over-Q decrease was primarily attributable to lower interest income from security borrowing and the lending business as well as best deposits. Other income was HKD 564 million, up 8% year-over-year and down 10% Q-o-Q. The year-over-year increase was primarily driven by higher currency exchange, service income and IPO subscription service charge income. The cubical decrease was mainly due to lower enterprises public relationship service charge income and IPO subscription service charge income.

Our total cost was HKD 749 million as compared to the first quarter of 2025. Brokerage commission and handling charge expenses were HKD 164 million, up [indiscernible] year-over-year 16% Q-over-Q. The year-over-year increase was broadly in line with the growth of our brokerage commission and handling charge income the Q-o-Q increase was mainly due to transaction fees repaid in the prior quarters. Interest expenses were HKD 415 million, down 12% year-over-year and 5% Q-o-Q. Both the year-over-year and Q-on-Q decrease was mainly driven by lower interest expenses associated with our securities borrowing and lending business. Processing and service costs were HKD 117 million, up 25% year-over-year and 13% Q-o-Q. Both year-over-year and the Q2 increase was primarily driven by higher product service fees. As a result, total gross profit was HKD 5.1 billion, an increase of 29% from HKD 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 HKD 1.6 billion, up 25% year-over-year and flat Q-over-Q.

R&D expenses were HKD 479 million, up 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 new markets. Selling and marketing expenses were HKD 557 million, up 21% year-over-year and 10% Q-o-Q. Both the year-over-year and Q-over-Q increase was mainly driven by higher customer acquisition costs. G&A expenses was HKD 541 million, up 30% year-over-year and flat Q-o-Q. The year-over-year increase was primarily due to an increase in G&A personnel. As a result, income from operations was HKD 3.5 billion, up 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 22, 2026, the company received an administrative penalty reprenotification letter from the China Securities 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 adjusted subsequent events under U.S. GAAP. 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% Q-over-Q to HKD 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% Q-over-Q to HKD 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 USD 418 million worth of ADS reflecting management's strong confidence in the company's future growth prospects and the commitment to deliver shareholder value.

Subject to market conditions, we may continue to execute repurchase from time to time and the USD 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.

[Operator Instructions]

And our first question is going to come from the line of You Fan of CICC.

[Foreign Language]

[Interpreted] Thanks sales management for taking my call. This is You Fan from CICC. I have 2 questions. 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 after Friday. And what's the impact on -- the second quarter is about our regional breakdown. Would you please share more data on the regional breakdown of the net new added paying clients existing paying clients in Q1 and also the AUM breakdown by region Q1. These are my 2 questions. Thank you.

[Foreign Language]

[Interpreted] CSRC and SFC released updated industry-wide regulatory update last Friday. Regarding cross-border securities future and fund-related activities involving mainland Chinese investors. We paid close attention to the update immediately and responded proactively. This regulatory adjustments apply uniformly across the industry, and the company will continue to actively embrace regulatory requirements and setting along subsequent compliance measures in stricter products with the guidance.

As a licensed financial institute, TCI has always placed compliance operations as its top priority. Previously, we had already fully sized account opening for Mainland Chinese Mtholder. We're continuously strengthen our account review and antiproduct mechanism. We maintained 0 tolerance towards fraudulent activity. And over the past 2 years, we have cumulatively rejected tens of thousands of noncompliant account opening application. As of the end of the first quarter, Mainland China founding accounts represent approximately 13% of our Q2 funding account. While related client assets accounted for around 17% of Futu, contributing approximately 20% of total revenue. In addition, the 2-year replication period of Mainland Chinese clients does not require force account closure, but rather, restrictions on deposits and security buying activities where clients are physically located within Mainland China. Over the past several years, Futu'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, move our overseas independent brands delivered strong year-over-year revenue growth across all overseas markets. With revenue in 5 countries, more than doubling. Overseas funded accounts surpassed 2 million while client quality continues to improve steadily with average AUM per client reaching approximately USD 18,000, significantly higher than that of other local online investment platform. Looking ahead, the company expects to expand into more international markets. Regulatory license applications are progressing smoothly. While 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 orderly manner. We do not expect this regulatory update to have any material impact on our full year guidance of 800,000 net new for the accounts. Q2 will continue to adhere to its compliance and international expansion strategy. We are continuously enhancing its product and service capabilities to drive long-term sustainable growth.

[Foreign Language]

[Interpreted] Malaysia and Hong Kong together contributed more than 0.5% half of net new fund accounts in the first quarter, while among the remaining markets, Singapore contributed the largest per share. And at the end of the first quarter, over 55% of the group fund accounts were under our overseas brand movement, primarily from Singapore, U.S. and also the Malaysia. At the end of the first quarter Futu Security Hong Kong entity contribute the largest share of the group's total assets. Within Momo, total client assets was primarily contributed by Singapore and the U.S. Thank you.

Our next question comes from the line of Leon Qi with CLSA.

[Foreign Language]

[Interpreted] This is Leon Qi from CLSA. I will recap my questions in English. I have 2 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 banks, 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 mature 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?

[Foreign Language]

[Interpreted] For first question, 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 commercial bank partners around the globe. I'm very happy to share that our credit facility remained 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.

[Foreign Language]

[Interpreted] While Futu has achieved a very extensive user coverage in Hong Kong and Singapore, there remain enormous potential to further penetrate and grow client assets our recent report issued by BCG stated that Hong Kong has overtaken Switzerland to become the world's largest core water wealth management hub with Singapore ranking the third -- according to the public data by SFC, Hong Kong's wealth management assets exceed HKD 35 million by the end Data from the MAS also shows the city state wealth management assets also topped HKD 34 trillion over the same period. By contrast, Futu Group's total assets stand now just over HKD 1 trillion. As 2 major international financial hubs, Hong Kong and Singapore boosted trillions in resident wells with our brand influence continue to grow our in-depth well service in these 2 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 2 mature markets. Thank you.

Our next question comes from the line of Tal Hung with MS.

[Foreign Language]

[Interpreted] So basically, 2 questions from me. One is on the U.S. 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. A second question on the crypto business in Hong Kong, especially regarding the VATP. Is there any update on the product and strategies and also potentially what kind of synergy could we have between the Hong Kong crypto business with that in the Singapore and the U.S.? And also wondering how does management think about at what level of client assets 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 -- for the acceptance of the client to grow.

[Foreign Language]

[Interpreted] Thanks for the questions. Regarding the production markets, Momo financial and Futu clearing officially obtained OCM license in May, allowing us to conduct production market brokage and the clearing business. Alongside the license application process, we have also completed the development of our product and system capabilities and expect to launch production market trading service to our U.S. retail clients in the near future. Compared with traditional derivatives such as futures, production markets products are generate more intuitive, easy for clients to understand and offer more flexible participation mechanisms. This not only helped 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 platform.

And we also witnessed in the past couple of months, a lot of major U.S. players such as Taxi, Holy markets and roaming goods made 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 the underlying assets would further enhance liquidity in both sports and the directive markets. while also strengthening the overall price discovery efficiency across security markets. Our expansion into the production market business in U.S. is not only intend to capture the rapid growth opportunity in the local market, but I think more importantly, to accumulate core know-how in areas such as product design, operational management and risk control. We believe this experience will help lay the foundation 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 protection market products.

[Foreign Language]

[Interpreted] So let me quickly translate. So in March, as Leaf mentioned in the opening remarks, Penetrate successfully passed the second phase approval of the onco FSC's ATP license and officially commenced full operation. So going forward, we will focus on advancing the business across 3 dimensions. So firstly, we will strengthen the internal synergy and traffic conversion capability. So currently a portion of Fuji Security's virtually asset trading volume and AUM has already migrated to penetrate. Looking ahead, as the group of gradually secure compliant virtual [indiscernible] in additional regions we will actively explore deeper collaboration opportunities between our regional conspiracy brokerage businesses and penetrate with applicable regulatory framework.

Second, we will continue to enhance our virtual asset product ability subject to regulatory approval, we tend to progressively introduce core functionalities such as OTC trading, additional token listings and staking services. Basically [indiscernible] to provide more comprehensive virtual asset solutions for high net worth and institutional clients. Binbaholding and exchange losses also allowed the group to participate more directly in industry infrastructure date. And actually explore innovative product opportunities, including perpetual future. And certainly, we aim to build a long-term ecosystem capability. So in the future, we plan to explore sector market trading for tokenized securities integration with third-party brokers and one-stop solutions for virtual asset ETF insurance covering IoT, trading, custody and sticking services. So as traditional finance and virtual asset markets continue to converge, penetrate has the potential to evolve into a key infrastructure platform within the Hong Hobaccosystem. And we've seen [indiscernible] single market for -- especially for the crypto part, they are still in the early stage of development.

So as for Futu, we will continue to do investor education and product innovation. So as a platform that has both brokerage and cut exchange capability, we think we are very confident in the future good potential of the overall crypto business. Thank you.

Our next question is going to come from the line of Emma Xu with BofA Securities.

[Foreign Language]

[Interpreted] 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 our interest income by category drivers of the quarter-over-quarter changes for each item as well as the quarter-to-date 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?

[Foreign Language]

[Interpreted] Now let me very quickly translate. In the first quarter, approximately 40% of the group interest income was from idle cash, another roughly 40% contributed by margin financing. The remaining mainly came from the store going and the lending business. the Q-over-Q decline in interest income was mainly attributable to lower store borrowing and idle cash interest income, while margin financing interest income achieved a sequential growth. idle cash interest income declined due to 2 reasons: #1 is federal 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 deep behaviors among clients, leading to sequential decline in average daily cash balance, which also weighed on idle cash interest income.

By contrast, supported by active margin trading activity in both the U.S. and Hong Kong. Our margin financing balance increased meaningfully on a Q-on-Q basis, therefore, contribute more market financing interest income. At the same time, security borrowing interest income declined sequentially mainly due to market factors as the entire volatility in the U.S. equity market was going down in the first quarter. overall short-selling demand moderate, leading to a meaningful decline in security lending yield at the same time. Based on the current run rate in the second quarter, we expect the overall interest income to remain broadly stable Q-on-Q. Thank you.

[Foreign Language]

[Interpreted] 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. Net is that inflows has maintained a strong growth momentum between in the first quarter. While 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 treating [indiscernible] , both AUM and trading volume has the potential to achieve double-digit sequential growth. Thank you.

Our next question comes from the line of Charles Zhou with UBS.

[Foreign Language]

[Interpreted] This is Charles Zhou from UBS. So I have 2 questions. The first, we have seen recent developments such as an acquisition of Bright Smart securities intensive marketing by Weibo, the launch of the Hong Kong U.S. [indiscernible] trading function by [indiscernible] Bank and CA Bank. So how does the company view the intensifying competition in the Hong Kong market?

My second question is related to South Korean markets. We also note that the Korean textiles have been performing very, very strong year-to-date. So does the company have any plans to expand into the Korean equity markets would appreciate if you can share some details such as your time line or maybe the target markets.

[Foreign Language]

[Interpreted] Let me very quickly translate. First, we think Hong Kong remains a market with significant long-term potential. According to the Hong Kong Chief Executive 2025 policy address, since the launch of [indiscernible] talent admission initiative, more than 230,000 professionals have relocated to Hong Kong for work and development opportunities against the backdrop of rising global multiple uncertainties, increased number of high net worth individuals and international capital are also flowing to Hong Kong, driving continued expansion in market wealth and SFPs.

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 study expansions in our customer base, client assets and the market share. At the core of this achievement is multi-dimension competitive mode we have built over time, supported by time barriers to entry. On the product and service front, we have already established a comprehensive one store financial service platform in Hong Kong, while continuous enhancing innovative capabilities such as AI applications. combined with competitive pricing, this enable 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 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 sense 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 ecosystem advantage, competition may, in fact, create opportunities to further consolidate market share. 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 our brands continue to mature. Supported by our long-term accumulative strength, we remain highly confident in our abilities to continue growth, both in client and client assets in the Hong Kong market. Thank you.

[Foreign Language]

[Interpreted] In April, Kutubu and Momo officially supported real-time market data for South Korean stock. Our team is currently actively preparing for the rollout of South Green 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 game exposure to soft inequity indirectly through leveraged ETF and similar products. As of May 26, Futu's securities clients accounting for approximately 30% and 18% of the holdings in the soft leverage EPS on sensor electronics and [indiscernible] EPR or SK Helix, respectively -- reflecting strong client demand for soft credit equities, particularly main within the AI supply chain.

As a leading one-stop investment and trading platform, Futu 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 opportunity 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 Tay 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.

Hello, ladies and gentlemen. Welcome to Futu Holdings Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] 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 Staff to CEO, Head of Strategy and IR at Futu. Please go ahead, sir.

Thanks, operator, and thank you for joining us today to discuss our fourth quarter and full year 2025 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. 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 Li. Li will make his comments in Chinese, and I will translate.

[Foreign Language]

[Interpreted] Thank you all for joining our earnings call today. In 2025, we delivered another year of strong client acquisition, adding more than 950,000 menu funded accounts and surpassing our full year guidance by 19%. Total funded accounts reached around $3.4 million, up 40% year-over-year. We remain confident in our ability to acquire 800,000 net new funded accounts in 2026, supported by strong bottom-up growth opportunities across both our established markets and newer ones.

[Foreign Language]

[Interpreted] And the robust growth in funded accounts in 2025 was broad-based, driven primarily by solid client additions from Hong Kong and Malaysia. In 2025, net new funded accounts in Hong Kong recorded high double-digit year-over-year increase as we continue to extend our market leadership on top of a high market share. Significant share gain was also observed in Malaysia, and we expect this momentum to continue given our competitive product offering and growing brand trust. In Japan, cumulative app downloads as of November last year crossed 2 million, further solidifying our position as the #1 foreign securities firm. Momo was also the most downloaded trading app in Australia in 2025.

[Foreign Language]

[Interpreted] In the fourth quarter, we added roughly 230,000 net new funded accounts, down 8% quarter-over-quarter, but up 9% year-over-year. While client growth in Hong Kong moderated sequentially following a sharp downturn in the local stock market, net new funded accounts in Japan and Malaysia recorded double-digit sequential growth, underpinned by strong client interest in U.S. stock trading and our superior U.S. stock offerings.

In the U.S., we rolled out another round of off-line marketing campaign highlighting key features for active traders. During the quarter, the number of auction contracts traded at, stock and crypto training volume in the U.S. market all posted double-digit sequential growth.

[Foreign Language]

[Interpreted] In the fourth quarter, net asset inflow remained strong. The mark-to-market losses on clients' Hong Kong stock holdings weighed on overall client assets. Total client assets were HKD 1.23 trillion at quarter end, up 66% year-over-year and flat quarter-over-quarter, with Hong Kong and Singapore saw rising net outside flow contribution from high net worth clients. While in the U.S., average client assets recorded the fastest sequential increase among all regions.

Underpinned by heightened U.S. stock margin trading activity, margin financing and securities lending balance expanded 7% sequentially to HKD 67.7 billion as of quarter end. A number of popular Hong Kong IPOs during the quarter further contributed to the increased use of leverage driving a double-digit sequential rise in daily average margin balance.

[Foreign Language]

[Interpreted] Total trading volume climbed to a record HKD 3.98 trillion, up 38% year-over-year and 2% quarter-over-quarter. The U.S. equity markets featuring numerous investment themes in 2025 and and we've observed our clients diversify and beyond large technology names into a broader range of sectors and across the AI value chain. As a result, U.S. stock trading turnover was up 17% sequentially to HKD 3 trillion in the fourth quarter. Hong Kong stock trading volume contracted 31% quarter-over-quarter to HKD 821 billion, as investor appetite to China technology stocks weighed the market correction in the second half. This decline was partially offset by elevated trading interest in gold and other precious metals related names.

Crypto trading volume remained resilient at approximately HKD 20 billion despite market headwinds, with crystal penetration among trading clients rising across Hong Kong, Singapore and the U.S. During the quarter, we expanded our crypto offerings by adding more than 10 points in both Singapore and the U.S. and further enrich to our market data and information around crypto.

[Foreign Language]

[Interpreted] Both management client assets reached HKD 179.6 billion, up 62% year-on-year and 2% sequentially. In response to growing client demand for portfolio diversification, we broadened our portfolio suite across key markets. In Hong Kong, we enhanced our lineup of high dividend funds and further lower the minimum investment threshold for structure product, making them more accessible to retail investors. In Singapore, we introduced more Singapore equity funds as well as for duration volume funds. In Malaysia, we launched sari-compliant bold tracker funds, which were met with strong demand from local investors.

[Foreign Language]

[Interpreted] During the quarter, we streamlined Airstar Bank's account opening processes and launched mutual funds and insurance products in the banking app. A desktop version was also introduced to clients with a seamless cross-platform experience. On the internal fund, we strengthened Airstar Bank's compliance and risk management capabilities by developing an anti-money laundering system and AI-powered fraud detection infrastructure. Looking ahead, we'll continue to enhance the technology infrastructure and user experience while exploring synergies between Airstar Bank and the group as we advance toward a comprehensive one-stop financial services platform in Hong Kong.

[Foreign Language]

[Interpreted] At quarter end, we have 600 IPO distribution in our clients, a 24% year-over-year increase. In 2025, we reinforced our standing as the leading online broker for Hong Kong IPO distribution and subscription. In 2025, we provided investment banking services to over half of the newly listed Hong Kong Board Company, with full year subscription amount on our platform, representing 49% of the total public offering subscription amount. The number of Hong Kong IPO subscribers on our platform grew nearly 5x year-over-year. In the fourth quarter, we assumed the role of overall coordinators for a number of high-profile Hong Kong IPOs, including those of Technology and.

[Foreign Language]

[Interpreted] Next, I'd like to invite our CFO, Author, to discuss our financial performance.

[Foreign Language] Thank you, Hua and Daniel. Please allow me to walk you through our financial performance in the fourth quarter. All the numbers are in Hong Kong dollars, unless otherwise noted.

Total revenues were HKD 6.4 billion, up 45% from HKD 4.4 billion in the fourth quarter of 2024. We concluded another strong year with full year revenue growing HKD 22.8 billion, up 68% year-over-year.

Brokerage commission and handling charge income was HKD 2.8 billion, up 35% year-over-year and down 5% Q-o-Q. Total trading volume grew both year-over-year and a Q-o-Q basis, while blended commission rates moderate as clients trade more higher-priced U.S. stocks and options during the quarter.

Interest income was HKD 3 billion, up 50% year-over-year and the flat Q-Q. The year-over-year increase was driven by higher interest income from security borrowing and lending business, banking deposits and margin financing. On a sequential basis, interest income remained stable as higher interest income from banking deposits and margin financing was offset by lower interest income from security borrowing and the lending business.

Other income was HKD 630 million, up 79% year-over-year and 42% Q-o-Q. The year-over-year increase was primarily attributable to higher fund distribution service income and IPO subscription service charge income. The Q-over-Q increase was mainly driven by higher enterprise public relationship service charge income and IPO subscription service charge income.

Our total cost was HKD 729 million, a decrease of 6% from HKD 776 million in the fourth quarter of 2024. Brokerage commission and handling charge expenses was HKD 141 million, up 26% year-over-year and down 12% Q-over-Q. Both the year-over-year and Q-over-Q movement were roughly in line with the change of brokerage commission and handling charge income.

The interest income were HKD 437 million, down 15% year-over-year and 8% Q-o-Q. Both the year-over-year and Q-o-Q decrease was mainly due to lower interest expenses associated with our security borrowing and letting business.

Processing and servicing costs was HKD 150 million, flat year-over-year and down 6% Q-o-Q. The Q-o-Q decrease was mostly driven by the sequential decrease in cloud service fees. As a result, total gross profit was HKD 5.7 billion, an increase of 56% from HKD 3.7 billion in the fourth quarter of 2024. Gross margin was 88.7% as compared to 82.5% in the fourth quarter of 2024.

Operating expenses were up 9% year-over-year and down 8% Q-o-Q to HKD 1.6 billion. R&D expenses was HKD 507 million, up 27% year-over-year and down 12% Q-o-Q. The year-over-year increase was mainly due to an increase in R&D headcount to support crypto and AI-related initiatives. The cumulative decrease was largely attributable to bonus accrual made in previous quarters.

Selling and marketing expenses was HKD 507 million, up 9% year-over-year and down 13% Q-o-Q. The year-over-year increase was in line with the growth of our new -- net new fund accounts and the Q-o-Q decrease was largely attributable to sequential lower new client additions and to a less extent, the decrease in client acquisition costs.

G&A expenses were HKD 549 million, down 5% year-over-year and flat Q-o-Q. The year-over-year decrease was primarily due to the lower professional service expenses compared to the year ago quarter. As a result, income from operations increased 87% year-over-year and 6% Q-o-Q to HKD 4.1 billion. Operating margin increased to 64.4% from 50% in the fourth quarter of 2024, mostly due to strong top line growth and operating leverage.

Our net income increased by 80% year-over-year and 5% Q-o-Q to HKD 3.4 billion. Net income margin expanded to 52.3% in the fourth quarter as compared to 42.2% in the same quarter last year. Our effective tax rate for the quarter was 16.3%.

That concludes our prepared remarks. We now like to open the call to questions. Operator, please go ahead.

[Operator Instructions] We will now take the first question from the line of Peter Zhang from JPMorgan.

[Foreign Language] This is Peter Zhang from JPMorgan, and many thanks for giving me the opportunity to ask questions and congratulations on the results. I have 2 questions. My first question is on the -- among the first quarter business trend. I'm wondering whether management can give us some color on the fee income growth, net asset inflow and trading velocity in the first quarter year-to-date? And also, how about the commission fee rate trend in 2026?

My second question is regarding the trading volume breakdown particularly for the U.S. trading volume. This maybe because in the past few years, some investors may view Futu as stock to China. And some investors think that our clients trade a lot Chinese AR stocks. But I guess given that we have very successful overseas expansion, the trading volume mix may change over time. So I'm wondering whether management can give us some color on the breakdown of your U.S. stock trading volume into Chinese ADI and other stock.

[Foreign Language] Let me just do the translation for your second question, I will do the answers regarding the Chinese ADR contribution for our U.S. stock trading volumes in the latest quarter, this portion is less than 10%. And even we compare with the third quarter last year, the number was still roughly around 10%. So I think structure-wise, the contribution from Chinese ADRs to our overall U.S. stock has been gradually decreased. I will now hand over to my colleague, Daniel, who will answer your first question.

[Foreign Language] So based on the trends we have seen year-to-date, we expect net new funded accounts and trading volume to be flattish quarter-over-quarter. And we've seen very strong bottom activities from our clients. So we expect a double-digit sequential increase in net asset inflows, and we expect the quarterly net asset inflow in the first quarter to be the highest quarterly number. And mark-to-market impact had -- was pretty strong, and it was pretty negative quarter-to-date. So we expect, all in all, total client assets to increase modestly by the end of the first quarter. Thank you.

And in terms of commissions -- blended commission rate, so far, I think we are seeing flattish Q-on-Q blended commission rate. Thanks.

We will now take the next question from the line of Emma Xu from Bank of America Securities.

[Foreign Language] The first one is about the crypto business. So what are the latest developments in the crypto-related business after the relaxation of Hong Kong's regulatory policies in February this year? What new products have been launched? And what is the current implementation status and performance?

The second question is about the AI. What specific empowerment that AI currently bring to your business? Will AI bring challenges to some business or put pressure on given the SLI model of your business?

[Foreign Language] In terms of the crypto development, I think in the first -- in Hong Kong, we are still waiting for the Hong Kong regulators for our VAT license approvals. We are very confident in the near future, we can get this license. And after the launch of the VAT piece, hopefully, we can, in the near future, Futu can start to provide our traditional clients for crypto trading on the back of the margin using their stock for the margins. And also, we will provide taking service for them as well. In the future, we also wish to provide a crypto service to our high net worth clients alongside with the service to our institution clients for the one-stop solutions.

And then in the past one quarter, we further enriched our product offering trading different tokens in Singapore and in the U.S. And at the same time, as we've mentioned in the opening remarks, in Hong Kong, Singapore and the U.S., the number of clients trading for the cryptos all include a double-digit increase, and the penetration rate for these [indiscernible] trading crypto also increased a lot to the latest high single-digit and low teen levels. We think this penetration rate can continue to grow in the foreseeable future. Thank you.

[Foreign Language]

[Interpreted] So AI is the company level of strategic priority at Futu. We've actually started AI assessments in 2022 and over the past few quarters, we have ramp up AI investment by deeply integrating AI capabilities into our product experience and internal operations. We now leverage AI to enhance the efficiency with which our clients discover investment opportunities and gather information. Our AI-generated daily and weekly reports automatically filter and key insights, cover over 20 types of market data, including technical indicators, patterns and loads and these offer better timeliness and broader content coverage compared to our peers.

Furthermore, AI power's summaries of earnings reports and news has also significantly improved client efficiency and gathering information. In the fourth quarter, we launched AI which allows users to generate quantitative trading strategies using simple natural language. This feature has been very well received by the advanced traders on our platform, lowering the barrier to creating professional investment strategy.

We have also expanded the asset classes coverage of our AI chatbot and AI analysis. So for the open it's quite popular recently. We now offer access through our open API. We've actually started developing open API in 2014 has been optimizing that experience ever since. And we've also supported skills that are accessible to open as well. So thanks to the years of development and accumulation and market data information in the trading infrastructure as well as our execution and clearing capabilities as well as our determination to embrace AI and our capabilities and leveraging AI to empower our business. We believe Futu will stay as a leading player in the AI era. Thank you.

We will now take the next question from the line of Chiyao Huang from Morgan Stanley.

[Foreign Language] So the first question is regarding the HKD 800,000 guidance on new founded accounts, which is a very strong number. And considering the rising market volatility year-to-date, I'm just wondering what will be the main drivers and the main areas that the management sees has larger potential to help achieve this target, especially including any new markets that we are targeting?

Second question is regarding the Airstar Bank. Just wondering what's the long-term planning -- strategic planning for the bank's positioning in the market? What kind of differentiation will be there compared to other virtual bank and the traditional banks? And do we have a time line of the product pipelines? Over time, what would be the expected revenue structure for Airstar Bank will be more balance sheet business or more fee income business in wealth management?

[Foreign Language] For the first question, for our 800 fund accounts, this number we have already in that one new markets, we will have potential to enter into in 2026. Despite the year-to-date, there is some market volatility arising from geopolitical tensions and a lot of macro headwinds, our client acquisitions run rate still remain very robust, and we are very confident to achieve these targets towards the end of this year.

Then for the Airstar Banks, we will continue to focus how to generate meaningful synergies between Airstar banks and the Futu existing business. As Leaf mentioned in the opening remarks in the fourth quarter and also in the next couple of quarters, our most work in Airstar Bank will center around in 2 aspects, externally is to upgrade the user experience and internally, we will further to enrich the infrastructure. On the -- in the external side, we have already launched some new wealth management products in Airstar Bank app. Like mutual funds and insurance products, there will be more wealth management-related products to be launched in the app in the next couple of quarters.

Then internally, we further to enhance the compliance and the risk controls, a lot of proprietary developed products to enhance the business efficiency and the lower operating cost for the banks. In the long run, we think the revenue stream will be more schooled to these fee income arising from the wealth management and associated activities supplement by some balance sheet expansion business. But having said that, this is a very long-term targets for revenue generation. So in the near term, we will still continue to focus the 2 aspects I mentioned before. Thank you very much.

We will now take the next question from the line of You Fan from CICC.

[Foreign Language] This is You Fan from CICC, and I have 2 questions. The first one is about the user regional breakdown. We still see strong customer growth we've captured despite the market downturn. So what's the regional breakdown of our existing and also the new paying clients?

And the second question is about AUM. How much is from client net asset inflow and how much from market-to-market depreciation? And what is the regional breakdown of the client asset?

[Foreign Language] For the contribution of the fourth quarter net add, Malaysia and Hong Kong collectively contribute over 50% of new client adds in the fourth quarter. Then other remaining markets like U.S., Singapore and Japan, their contribution rate is in the percentage of 10% to 20%. And as the year ends, the fund accounts in the universe of our overseas brand moomoo has already increased to 55% of total group fund accounts. Among them the contribution from Singapore and the U.S. was most.

And for the second question regarding the new net asset flow inflows in the fourth quarter. The Q-on-Q basis, the net asset inflows have some moderations in the fourth quarter. But on the absolute levels, it remains in a very high levels, the momentum keeps very strong, but you can imagine in the fourth quarter, Hong Kong market got a lot of retreat. For instance, Hansa Index down 5% Q-o-Q and Hansa Tech Index, down 15% Q-o-Q. Therefore, we got some negative impact from the market-to-market loans, which almost fully offset the net asset inflows in the fourth quarter.

And at year-end, Hong Kong remains the largest in terms of clients' assets AUM breakdown, followed by Singapore and some new markets like Japan and the U.S. the contribution, we see a very good momentum to increase. Thank you very much.

We will now take the next question from the line of Leon Qi from CLSA.

[Foreign Language] I will briefly translate my questions into English. This is Leon Qi from CLSA and congrats again on very strong fourth quarter results. I have 2 questions today. First one is actually a follow-up on our new markets this year. Is it possible for management to give us some clues in terms of our rationale of entering these new markets? Is it going to replicate one of our existing markets? Is the significance mostly on new paying clients or any new strategy in terms of products, et cetera. So if it is possible for management to share with us some clues of entering market this year?

The second question is actually a bit operational. We just want to understand the reasons behind the very resilient quarterly net asset inflow. In particular, in Hong Kong, we do understand that high net worth clients a few years ago. How do we evaluate the performance of our relationship managers for these high net worth clients, is net client inflow, a major metric that we actually look at or we actually look at other metrics such as total assets, new funded accounts or even metrics such as the performance of client assets or the number of different products that our clients hold. So this kind of operational metrics will be very helpful for us.

[Foreign Language] Regarding the first question for this new market, it is still too early to share the exactly the market name, given that we are still in the process of the license applications, but we think this market will be in the universe of Asia.

Then for the second question for the certain performance measurements for our internal colleagues regarding the high net worth clients. As you said, the new asset inflow is definitely one factor of the -- of our overall metrics which is very comprehensive and also outline is to care about the clients like and values. Therefore, the net asset inflows and also including the clients' total asset retention rate all these factors into this metrics. Thank you.

We will now take the next question from the line of Cindy Wang from China Renaissance.

[Foreign Language] Congrats for the great fourth quarter results. So I have 2 questions here. First, for your new funding accounts target HKD 800,000 in 2026, could you break down the expected contributions from Hong Kong and overseas market? And what is the expected average customer acquisition cost for the whole year?

Second is quarter-to-date, we saw a strong market really starting in January, but followed by recent stock market volatility due to geopolitical risk. So based on investors' trading activity on your platform, could you provide some guidance on trading volume, trading velocity and margin financing and security spending demand trend in first quarter?

[Foreign Language] In terms of the breakdown of the new fund account targets for 2026, we think largely it will be the same stock contributions from different markets in 2025. And Hong Kong will continue to be a very strong contributor in terms of the geographic locations. Then for the cap, our initial objective for this year's cap will be around 25,000 to 30,000 -- sorry, 250,000 to -- sorry, HKD 2,500 to HKD 3,000 considering the uncertainty of this year's market volatility. And also, there will be some fund loaded cost in this new market expansion, as I mentioned before. Therefore, there we want to leave some flexibility in the CAC objective. But year-to-date, we think the CAC acquisition situations remain very robust and CAC for the first 2 months, I think will be in the low end or even lower than the range I mentioned before.

[Foreign Language] So in the first quarter, quarter-to-date, the market has been quite volatile, and we've seen our clients engaging very actively with the market. We expect the first quarter's total trading volume to be flattish during the quarter. So it's going to stay at the historic high that we've seen in the fourth quarter last year. And when the market experienced a pullback, we've seen lots of activities from our clients. We're expected a sequential increase in our margin financing and securities lending balance. And as we shared earlier, net asset inflow is also very strong, and we expect a historic high quarterly net asset inflow in the first quarter. Thank you.

We will now take the next question from the line of Zoey Zong from Jefferies.

[Foreign Language] This Zoey from Jefferies. I have 2 questions. First, could you please elaborate on the competitive landscape in Hong Kong? And how do we see the market share momentum in Q4 and recently in Q1?

And second, in November last year, we announced a share repurchase program of up to [ USD 800 million ] till December '27, could you please give us an update on the progress? And how should we expect the pace in the next 2 years?

[Foreign Language] Regarding share buyback programs, so far, in the fourth quarter, actually, we have not conducted any share buyback within this [ 800 million ] share buyback programs, which will cover toward the end of 2027. So we will continue to closely work the market conditions and looking for potential market opportunities to come up with share buyback program, which is more preemptive. Thank you.

[Foreign Language] So we haven't seen any incremental changes in terms of the competitive landscape in Hong Kong. We think our performance in Hong Kong is still influenced by the overall market sentiment. And in the fourth quarter due to the sharp pullback of the Hong Kong stocks, the Hong Kong retail investors had -- was overall quite bearish about the market. So our client acquisition decelerated sequentially of the very active Hong Kong IPO market to some extent listed investor sentiment.

And just looking back at 2025, Hong Kong contributed the highest number of net funded accounts within the Food Group and the net funding accounts achieved high double-digit year-over-year increase. So we're able to extend our leadership and further solidified our leadership on top of a very high market share. And we not only saw very strong client growth in 2025, we also saw very strong net asset inflow. And we've seen a higher percentage of contribution in terms of net asset inflow from our high net worth claims, which was largely due to a growing portfolio of wealth management products and our more professional -- in our image of a professional finance platform, thanks to the series of brand initiatives that we carried out and lots of investment forms and lectures that we did throughout the year.

And we think that very strong performance in Hong Kong 2025 really speaks to our assessment of the market potential earlier. We believe that Hong Kong has huge headroom to growth for us in terms of both client numbers and client assets. And looking to [ 2026 ], we'll continue to enhance our product capabilities. We'll continue to invest in brand building, and we are very optimistic about the long-term growth opportunity in Hong Kong. Thank you.

We will now take -- sorry, I would like to hand back over to the speakers for closing remarks.

That concludes our call today. On behalf of the Futu management team, I would like to thank you for joining us. 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. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, ladies and gentlemen. Welcome to Futu Holdings Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 CEO, Head of Strategy and IR at Futu. Please go ahead, sir.

Thanks, operator, and thank you for joining us today to discuss our third quarter 2025 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.

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 in Chinese, and I will translate.

[Foreign Language]

[Interpreted]

Thank you all for joining our earnings call today. We concluded the third quarter with 3.13 million funded accounts, marking a 43% year-over-year and 9% quarter-over-quarter increase. During the quarter, we acquired 254,000 net new funded accounts, up 65% from a year ago and 25% sequentially. We're encouraged to see accelerated client acquisition in all markets.

[Foreign Language]

[Interpreted] In the third quarter, Hong Kong posted the highest quarterly net client adds since the first quarter of 2021 and remained the largest contributor to new funded accounts among all markets for 4 straight quarters. We effectively sparked and captured clients' trading interest amid a quarter of strong equity market performance and busy IPO schedules. With the new IPO FINI framework, retail investors in Hong Kong increasingly consolidate their brokerage accounts to increase their chances of getting IPO allocation, and they tend to pick a trusted platform with the best overall user experience at their main brokerage accounts.

[Foreign Language]

[Interpreted]

In Singapore, new funded accounts again posted steady sequential growth, and we led our peers in DAUs by an even wider margin, further solidifying our position as the #1 retail broker in Singapore. Following 7 quarters of rapid expansion in Malaysia since launch, we still see huge runway for future client growth as equity ownership continues to go up. In the third quarter, we further strengthened product localization by launching Bursa derivatives and SGX futures and upgraded AI tools to support Malay language and local stock analysis. Our annual flagship offline investor event, MooFest, was held in Singapore in July and in Malaysia in October, altogether attracting over 28,000 investors to sign up and further elevating our brand image in the region.

[Foreign Language]

[Interpreted]

Thanks to our growing brand recognition and product experience, our U.S. business delivered another quarter of high-quality growth. We achieved high double-digit sequential increase in new funded accounts. We also observed another quarter of more active derivatives trading activity as both the number of option traders and option contracts traded recorded double-digit sequential growth.

[Foreign Language]

[Interpreted]

As of quarter end, total client assets reached HKD 1.24 trillion, up 79% year-over-year and 27% quarter-over-quarter. The growth was driven by another quarter of robust net asset inflow, while the appreciation in client stock holdings also contributed meaningfully to the overall asset expansion this quarter. Average client assets locked double-digit sequential increases and hit new highs in every market. Bullish sentiment on Hong Kong and U.S. equities prompted more leverage positions. A buoyant Hong Kong IPO market also boosted financing demand. As a result, margin financing and securities lending balance climbed 23% quarter-over-quarter to HKD 63.1 billion.

[Foreign Language]

[Interpreted]

Total trading volume rose 105% year-over-year and 9% quarter-over-quarter to HKD 3.9 trillion on the back of favorable market dynamics and upbeat investor sentiment. Elevated trading velocity and technology names lifted overall Hong Kong stock trading volume by 43% sequentially to HKD 1.19 trillion, which accounted for 31% of total trading volume, the highest percentage since 2023. U.S. stock trading volume remained elevated at HKD 2.6 trillion as many technology and crypto names posted new highs.

[Foreign Language]

[Interpreted]

Crypto trading volume surged 161% sequentially, driven by a 90% quarter-over-quarter increase in crypto asset balance and accelerated trading velocity. Ethereum trading volume quadrupled during the quarter, overtaking Bitcoin as the most popular coin on our platform. In Hong Kong, the launch of Solana for retail investors was well received. Solana contributed meaningfully to the growth of crypto turnover this quarter. We believe that as we continue to broaden coin selection, strengthen product capabilities and deepen investor education, there is significant potential to further drive crypto trading penetration among our client base.

[Foreign Language]

[Interpreted]

Period-end wealth management assets rose 8% sequentially to HKD 175.6 billion. During the quarter, clients increasingly allocated to fixed income funds alongside the sustained inflow into money market funds. To better serve the bespoke needs of professional investors, we introduced a self-service request-for-quote function for structured products, whereby clients can customize products based on their desired parameters, access and compare quotes from a number of issuers and execute trades seamlessly without human intervention. We leverage technology to remove friction in the client experience while driving operating efficiency.

[Foreign Language]

[Interpreted]

We ended the quarter with 561 IPO distribution and IR clients, up 22% year-over-year. We continue to play a leading role in facilitating retail participation in the heated Hong Kong IPO market. In the third quarter, 12 IPOs each attracted over HKD 100 billion in subscription amount on our platform. We served as joint bookrunners for multiple well-known listings, including those of Chery Automobile, Hesai Group, and Lens Technology. Notably, in the Butong Group IPO, we assumed the role of overall coordinators for the first time, underscoring the advancement of our enterprise service capabilities.

[Foreign Language]

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

Thank you, Leaf and Daniel. Please allow me to walk you through our financial performance in the third quarter. All the numbers are in Hong Kong dollars, unless otherwise noted. Total revenue was HKD 6.4 billion, up 86% from HKD 3.4 billion in the third quarter of 2024. Brokerage commission and handling charge income was HKD 2.9 billion, up 91% year-over-year and 13% Q-over-Q, both primarily driven by higher trading volume. The change in blended commission rate was mostly technical in nature. The blended commission rate declined year-over-year as clients trade a higher-priced U.S. options compared to a year ago quarter, while the Q-over-Q increase in blended commission rate was due to sequentially stronger trading activities in low-priced U.S. stocks and options.

Interest income was HKD 3 billion, up 79% year-over-year and 33% Q-o-Q. The year-over-year increase was driven by higher interest income from security borrowing and the lending business, margin financing and bank deposits. The Q-over-Q increase was driven by higher interest income from security borrowing and the lending business as well as higher margin financing interest income. Other income was HKD 441 million, up 111% year-over-year and flat Q-o-Q.

The year-over-year increase was primarily attributable to higher currency exchange service income, fund distribution service income and IPO subscription service charge income. Our total cost was HKD 780 million (sic) [HKD 793.7 million], an increase of 25% (sic) [27%] from HKD 625 million in the third quarter of 2024. Brokerage commission and handling charge expenses were HKD 161 million, up 97% year-over-year and flat Q-o-Q. Both the year-over-year and the Q-over-Q increase was roughly in line with the change of our brokerage commission and handling charge income. Interest expenses were HKD 474 million, up 17% (sic) [14.6%] year-over-year and 25% Q-o-Q. Both the year-over-year and Q-over-Q increase was mainly due to higher interest expenses associated with our securities borrowing and lending business as well as higher margin financing interest expenses.

Processing and servicing costs were HKD 146 million, up 12% year-over-year and 10% Q-over-Q. The year-over-year increase was largely due to higher market information and data fee. The Q-o-Q increase was mainly driven by higher market information and data fee as well as higher product service fee. As a result, our total gross profit were HKD 5.6 billion, an increase of 100% from HKD 2.8 billion in the third quarter of 2024. Gross margin was 87.8% as compared to 81.8% in the third quarter of 2024.

Operating expenses was up 57% year-over-year and 31% Q-o-Q to HKD 1.7 billion. R&D expenses was HKD 574 million, up 49% year-over-year and 30% Q-o-Q. The year-over-year and Q-o-Q increase was mainly driven by our greater investment in crypto and AI capabilities. Selling and marketing expenses were HKD 586 million, up 86% year-over-year and 36% Q-o-Q. Both the year-over-year and Q-o-Q increase was mainly attributable to higher new fund accounts. G&A expenses was HKD 535 million (sic) HKD [545 million], up 40% (sic) [43.1%] year-over-year and 26% Q-o-Q. Both the year-over-year and Q-o-Q increase was primarily due to increase in general and administrative headcount.

As a result, income from operations increased to 127% (sic) [125.5%] year-over-year and 17% Q-o-Q to HKD 3.9 billion. Operating margin increased to 61.3% from 50.4% in the third quarter of 2024, mostly due to strong top line growth and operating leverage.

Our net income increased by 143% year-over-year and 25% Q-o-Q to HKD 3.2 billion. Net income margin expanded to 50.1% in the third quarter as compared to 38.4% in the same quarter last year. Our effective tax rate for the quarter was 16.7%.

That concludes our prepared remarks. We'd now like to open the call to questions. Operator, please go ahead.

[Operator Instructions] We will take our first question, and the question comes from the line of Cindy Wang from China Renaissance.

[Foreign Language] Congrats for the very good results in Q3. I have two questions here. First, client assets performed very strong in Q3. Could you break down by mark-to-market gains and net asset inflows? And what is the current run rate for net asset inflow in client asset in Q4? Second, customer acquisition cost in Q3 was higher than Q2, but still lower than your early full year guidance. So given stock markets pullback quarter-to-date, what's the recent customer acquisition trend? And what do you expect the customer acquisition cost in Q4?

[Foreign Language]

For the first question, regarding the asset movement, around 1/3 comes from the net client asset inflow and the remaining 2/3 comes from the market-to-market fluctuations. And in the fourth quarter, quarter-to-date, actually, the mark-to-market implication was negative. But on the flip side, the net asset inflows, we see the momentum remains very robust and there's no any slowdown compared with the second quarter or the third quarter.

Then in the third quarter, regarding the client acquisition, the average CAC in the third quarter is around HKD 2,300, slightly up on a Q-on-Q basis. But on the absolute levels, it still [indiscernible] remains our full year's target, the range of HKD 2,500 to HKD 3,000. And in the fourth quarter today, what I witnessed is that both the client acquisition momentum and also client acquisition cost remains quite healthy. So overall speaking, I feel more optimistic regarding our over years client acquisition cost versus our objective in the beginning of this year.

Your next question comes from the line of Peter Zhang from JPMorgan.

[Foreign Language]

This is Peter Zhang from JPMorgan. We have two questions. The first question is related to interest income. We saw the third quarter interest income record a very strong sequential growth. We would like to understand what's the driving forces behind the strong momentum? And can management help us to break down the quarterly interest income into the key items that is the interest income from the client idle cash from margin financing business and from the security lending. And we also noticed that the security borrowings contribution to interest income has been very strong in second and third quarter. We wish to understand is this purely due to the market? Or is there something Futu has been doing at the company level to lead to the strong growth?

Our second question is related to crypto business. We wish to understand what's the latest crypto business contribution to your revenue in third quarter? And looking ahead, what will be the driving forces for crypto business to expand? For example, is this mostly due to the expansion of the token offering on your platform? Or do management see other potential business like derivatives or staking business may have some upside to your crypto business?

[Foreign Language]

Regarding the breakdown of the interest income in the third quarter we have 2 different source arising from the interest income. Number one is from the clients idle cash. The other -- second is from the margin financing and the third is the security borrower and lendings. Actually, in the third quarter, the percentage for these 3 sources are quite even. Regarding the security borrowing and the lending business, we see a very strong momentum in the second quarter and the third quarter, but mainly the driving force was from the market itself. In particular, there will be more utilization for certain hard-to-borrow stocks in the third quarter.

Peter, this is Daniel. I will take your second question on our crypto business. First of all, I'm going to give you a breakdown of the exponential growth we saw in third quarter, and then I'll discuss the outlook for this business. So the strong crypto growth was quite broad-based across the 3 markets that we currently offer crypto trading. In Hong Kong, for example, our clients' crypto AUM and crypto trading volume both reported triple-digit sequential growth. And as we mentioned in our opening remarks, the Solana was very popular among our retail clients, which is the new client to us in the third quarter.

And in Singapore, we also saw triple-digit growth in crypto trading volume and continuously growing penetration among our funded accounts. In the U.S., we launched a number of new functions, including market orders and added 10 new coins, which really helped driving crypto AUM and volume. And so far, as we've seen in the third quarter, there's a lot of volatility in the crypto market. But we've seen that a lot of our clients really took advantage of those volatility. In October, for example, we've seen the crypto volume continue to grow high double-digit month-over-month and hit a new high for monthly volume and continuous uptick in the crypto penetration. So these are all very encouraging signs.

But still, crypto contributed a very small percentage to Futu's current revenue. But we think there is a long runway for growth in terms of driving crypto penetration on our client base and driving crypto revenue. And in terms of some of the factors and catalysts that's going to help with that revenue growth, I agree with a lot of things you mentioned just now, like a broadening of token offering will be quite helpful and will be a direct beneficiary of that. Of course, derivatives with higher take rate is going to help with monetization. But a lot of these development will be contingent on regulatory approvals. But long term, we are quite optimistic about the growth of this business. And we understand that a lot of these new businesses, they don't really grow in a linear fashion.

[Foreign Language]

I will kind of follow up on the interest income part of the question. We wish to understand what's the fourth quarter trend on interest income, particularly for your security borrowing business, do you see the momentum continue in fourth quarter?

[Foreign Language]

Regarding your question about the interest income trend, we do not have the high-frequency data set for the interest income, in particular, regarding the security borrowing business, but I'm very happy to give you an update during our fourth quarter results.

Your next question comes from the line of Emma Xu from Bank of America Securities.

[Foreign Language]

So I have two questions. The first one is about the sensitivity analysis to the Fed rate cut. And the second one is about your R&D and G&A cost. They increased notably quarter-over-quarter and year-over-year. You mentioned earlier for the R&D expense, it's mainly related to crypto and AI capacity investment and for G&A staff increase. So could you tell us what's your target or your plan for investment in these areas?

[Foreign Language]

Regarding the interest income sensitivities from the Fed, as we give the market some estimation for every 25 basis cut by the Fed rate, our monthly pretax profit will be negatively impacted by around HKD [3/7] million. But having said that, the rate definitely will have a lot of positive factors such as the trading velocity increase and also more client asset inflows, which will partially offset, if not fully offset this potential negative implications from the rate cut.

Regarding the second question for the Q-o-Q increase on the R&D and G&A expenses. For the G&A expenses, we do have some front-loading costs, in the preparation of certain new markets we may open in the next 2 years. And secondly, we will -- we have invested a lot on the crypto side, especially on the system in the preparation of certain license applications, not only including Hong Kong, but also in other markets. And also regarding the AIs, we will further optimize our AI capabilities, especially for the external part, there will be further optimization for our AI agent for our clients. And internally, we will further utilize our AI capabilities to streamline our business process and enhance our operating efficiency.

Your next question comes from the line of You Fan from CICC.

[Foreign Language] Congratulations on the outstanding results achieved this quarter. This is You Fan from CICC. I have 2 questions here. The first question, we see the strong customer growth this quarter. So was the regional breakdown of the existing and also the net new paying clients? And the second question is regarding the U.S. market. Would you please share more color on the market, our strategy and what's our competitive advantages to the other peers in this market?

[Foreign Language]

For the breakdown of the new fund accounts in the third quarter, Hong Kong and Malaysia collectively contribute around 50% of total new fund accounts contribute in the third quarter, except certain new markets or small markets we entered recently, such as Canada and New Zealand, the remaining markets contribution is in the range of 5% to 15% for the third quarter. And at the end of the third quarter, the Greater China clients contribute around total 46% of the group fund accounts and the remaining overseas markets contributed 54% of total accounts.

This is Daniel. I'll take your second question on our U.S. business. As you mentioned, we saw very strong momentum in terms of new funded accounts and also in terms of the engagement of our existing clients with a number of options traders and options contracts traded, both logging double-digit sequential growth. I think that really thanks to our increasing brand influence. And if you've been to New York recently, you'll see that we've launched another large-scale branding campaign in New York City in the heart of New York City.

And another important factor is, obviously, we have a very superior product experience for our target clients. U.S. is probably the most competitive market in the world, but it's also unequivocally the largest brokerage market out there, which means that there's going to be diversified client needs to be satisfied by different players. We think that our product is built for sophisticated active traders and those are the clients we want to serve, and we'll continue to optimize our product experience for that client focus.

[Foreign Language]

Your next question comes from the line of Charles Zhou from UBS.

[Foreign Language] This is Charles Zhou from UBS. So first of all, congratulations to your very good results. It's also a strong beat to the market consensus. So I have two questions. So my first question is about the Airstar Bank. Could you please share what investment have you made since Futu acquired 44% equity stakes in Airstar Bank, I think, last June? And also, how do you see the Airstar Bank's strategic role within Futu business in terms of short-term, medium-term and also long-term perspective?

My second question is regarding the regional mix of the client AUM net inflow. Can you maybe just give us a little bit more color about the breakdown of the regional mix? So, for example, does Hong Kong still account for over 70% and also, are we seeing like a rising share from high-net-worth clients in the third quarter?

[Foreign Language]

Regarding the breakdown of the net asset inflow by regions, actually, we see the percentage contributed by Hong Kong got some slightly decreased on a Q-on-Q basis, mainly due to certain overseas markets such as Singapore, Malaysia also recorded a very strong asset inflows. So proportion-wise, Hong Kong's percentage contribution was down a little bit. And regarding the client cohort, we do think -- we do see more and more high net worth clients contributions in Hong Kong. And we do think this kind of trend will remain in the next coming quarters. And we think we have a very meaningful potential in terms of further upgrading our clients' quality in Hong Kong through wealth management, et cetera?

Charles, this is Daniel. I'll take your first question on Airstar Bank. First of all, to give you an update on our investment, during the third quarter, upon regulatory approval and the discussion between the shareholders, we have increased our stake in Airstar Bank to 68.4%, thereby becoming the controlling shareholder of Airstar Bank. So in the short term, we'll continue to focus on improving the customer experience through enriching products and capabilities. And we believe that there is a lot of integration opportunities between the banking business and the brokerage business.

And in the long term, we believe that the banking business can help Futu increase client stickiness and to improve clients' wallet share and will enable clients to complete fund deposits, investments, lending and consumption. We can satisfy all these various financial needs within Futu's ecosystem, and we can continue to enhance our clients -- our brand perception of Futu as a one-stop financial services platform. And so far, Futu is the only online brokerage platform in Hong Kong that has integrated digital banking capabilities. And we believe the scarcity of that license and the diversity of products and services we can offer under this license will continue to widen our competitive moat.

And after this round of capital injection, Airstar Bank will be consolidated into Futu's financial statements. In the next 2 to 3 years, we'll still be in an investment mode for Airstar Bank. But we believe that as Futu's client quality improve across various markets and as more markets become profitable and play out that operating leverage, the drag of Airstar Bank's loss to Futu's overall P&L will be limited. And after the capital injection, Futu and Xiaomi Group will continue to work very closely and to take advantage each other's resources in their respective ecosystems to operate this bank together.

[Foreign Language]

Your next question comes from the line of Chiyao Huang from Morgan Stanley.

[Foreign Language]

So I have two questions. One is about the product pipeline from crypto and tokenization in the next 1 or 2 quarters? And then maybe a bit longer term, what kind of value proposition do we try to achieve on tokenization to our clients? And second question is about whether management have any plan on M&A in the crypto space to accelerate the capability building? And what kind of capability of crypto are we looking to build in the near term?

[Foreign Language]

Regarding your two questions about the crypto. Number one, for the product -- new product pipelines and also tokenization, we do have a lot of preparations and internal discussions, even some layout of certain products in that connections. But as you can understand, tokenization is a very new concept to the market nowadays and subject to different regulatory regimes examinations. So it is very difficult for us to lay out a very clear road map for the product launch, given that a lot of factors will be regulatory dependent. And regarding the M&A in the crypto side, definitely, we are very open in this direction, given the crypto is a very strategical important considerations in our business direction down the road. So definitely, we will keep these options open afterwards.

Your next question comes from the line of Leon QI from CLSA.

This is Leon QI from CLSA. I have two questions today. Firstly, we are very glad to see that Hong Kong for the fourth consecutive quarter has led new client additions. I'm just interested in the client profile of our new customers being acquired in Hong Kong for the past quarter and actually for the past 4 quarters in general, given Hong Kong's equity market started to become quite active since around 4 quarters ago. If there are any meaningful differences in terms of these new customers in Hong Kong in terms of average AUM, ages, trading velocity, the products they are buying, if there are any notable differences for these new clients compared with our existing Hong Kong customers, most of which were acquired during probably the bull market a few years ago? So that's the first question on Hong Kong new customer profile.

And second question, I'm interested in the gross margin trend in markets outside Hong Kong. I'm very -- we are very pleasantly surprised to see gross margin disclosed in the third quarter was very strong. And given we also have very good AUM growth in markets like Singapore and a lot of new clients in Malaysia, I presume the economy of scale is kicking in very rapidly. If possible, if management can share with us some gross margin trend in Singapore and Malaysia, where are the margin in these markets standing in now?

[Foreign Language]

Leon, thank you for these two questions. This is Daniel. I'll take these two questions. First of all, regarding our Hong Kong business and in fact, in the third quarter, we have seen continued upward trajectory in average client assets of our new clients. And that coupled with the continuous net asset inflow, very robust net asset inflow from our existing clients led to a double-digit sequential growth in average client assets in Hong Kong. And I think that is representative of what happened in the past couple of quarters. As we continue to enhance our brand image, I think we can continue to attract more and more high-quality clients, and there will be more clients that are inclined to do one-stop asset allocation within Futu's platform.

And in terms of these clients' behavior, trading behavior specifically, I think that's very much market-driven. As you know, in terms of our total trading volume in the past year or so, it's mostly kind of U.S. stocks. But in Q3 this year, as the Hong Kong equities market outperformed, a lot of our clients quickly flocked to Hong Kong equities and engaged quite actively. So I think this is very much driven by the performance and the relative outperformance of different equity markets. We think this is more cyclical than structural in terms of clients' trading behavior.

And to your second question, yes, we think that online brokerage business inherently has huge operating leverage. But on the gross margin level, it's been very healthy across all of our markets because it mostly relates to trading and our trading product and margin product all have very high margins, so the operating leverage mostly kicks in from the operating expenses. And as we continue to scale in a lot of these international markets, we have seen a very rapid expansion in operating leverage. And maybe to give you some numbers on our Singapore business, for a couple of consecutive months, we have seen our -- the operating margin in our Singapore business consistently topped 60% and is still expanding. I think that really speaks to the strong operating leverage in our business model.

[Foreign Language]

This concludes today's question-and-answer session. I'll now hand the call back to Daniel Yuan 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. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]