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Futu Holdings, Limited (FUTU) is a fintech company that offers a variety of services within its digital financial service platform. Futu’s main product is their stock trading platform Futubull, which primarily serves clients in China and Hong Kong, but is rapidly expanding into other parts of the world. The company aims to bring investing to the emerging middle class in China and Hong Kong, and has positioned itself to be one of the most established players in the region. As investing in the stock market becomes more assessable, the company has positioned its platform as the place to be for new investors.
What is Futu Holdings Limited (FUTU)?
Futu Holdings Limited was established in Hong Kong in 2011. Through their ecosystem, the company offers a range of services, from online brokerage services to wealth management to a variety of social features. Through these social features, the company has created a platform that brings together investors, analysts, media members, and companies. All of these features are integrated together through the Futubull app. The app is available on mobile devices, tablets, and desktops, providing a range of options to users who want to connect, trade, or learn more about the securities market. The company believes that the services they provide allow for a reduction in information asymmetry and provides investors with as much information as possible to make informed decisions.
The company currently employs over 500 people and has been scaling up its workforce as they rapidly expand. In 2018, Futu began to explore expansion into the United States. After setting up offices in California, the company began to offer services in the U.S. market through their subsidiary Moomoo. The expansion was fueled by money raised during their IPO in 2019. In addition, funding has also come from Futu’s largest investor Tencent. As one of China’s largest conglomerates and one of the world’s most valuable companies, Tencent’s belief in the company has been a signal to many investors as to the long-term potential of Futu in China, Hong Kong, and overseas. The founders and many current executives of Futu have experience working at Tencent, and these connections are likely to be useful down the road as the company continues to grow.
Why does Futu Holdings Limited (FUTU) Matter?
As the Chinese economy continues to grow, more and more affluent individuals are entering the equities market for the first time. Having been referred to as “the Robinhood of China”, the company is in a position to bring a user-friendly platform to the ever-growing younger generation in the country. With gamification options and a social appeal, the company’s Futubull application has created an experience that is superior to many traditional brokerages. Similar to Robinhood, Futu is also driving users to their platform through its low fees and ability to access margin financing. With the ability to trade stocks, warrants, options, and exchange-traded funds in a variety of different markets, the company has opened up investing to a previously untapped group of individuals. Revenue is generated through transaction fees as well as interest from interest margin financing and other securities lending services.
Another major boost to the company was their decision to list on the NASDAQ. By listing on international exchanges rather than just domestically, the company has been able to capture the attention of a large group of investors around the world. This additional attention and increased stock evaluation have allowed the company to raise additional capital to fuel its growth. As seen in their recent foray into the American market, Futu Holdings is not shying away from taking its well-developed platform and disrupting the financial marketplace anywhere in the world.
Futu Holdings Limited (FUTU) Prospects
The company has had an impressive rate of growth over the past several years. The number of paying clients has increased from just over 80,000 in 2017 to an impressive 200,000 in 2020. The Chinese and Hong Kong markets are underserved and a lack of easily accessible trading platforms has been identified. The 97% customer retention rate Futu has established is evidence of this, as individuals who begin to use their services are unlikely to leave due to a lack of competition. It is estimated that the total number of retail investors in China is 167 million, equating to approximately 12% of their population. Just like in North America, everyday regular people have increasingly shown interest in trading, as the impacts of the pandemic have driven people indoors and looking to develop new skills and grow their wealth.
One potential wildcard could be the risk of Chinese government regulation, which has been demonstrated in the past. Ant Group, a subsidiary of Alibaba that also operates in the fintech space, was prevented from IPOing in late 2020. This saga was well documented and could potentially be a red flag to some investors who are wary of history repeating itself. Nevertheless, the company’s growth trajectory is hard to ignore. As more and more younger individuals become interested in getting involved in the stock market, the company is likely to continue its exponential growth
Where to Buy Futu Holdings Limited (FUTU)
A broker that we recommend is Firstrade.
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The ability to partake in the stock market is increasingly attractive to many in the younger generation. With the Futubull platform, the company has created an ecosystem that will allow millions of users to research companies, make trades, and share ideas all in one space. By decreasing the barriers to enter the market to new investors, the company is opening the doors to an entirely new population. This strategy, combined with an increased overall interest in investing, has left the company in a very amicable position to scale up operations and continue to grow.
Baggio has been an investor in the technology space for over half a decade. He uses the perspectives gained from his work experience in the private, public, and non-profit sectors to guide his investment strategy, with a specific interest in the potential of emerging disruptive technologies.