Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

Thematic (Sector/Industry)

<p>This Original aims to identify the key investment opportunities among the listed brokers in the three major East Asian countries - China, Japan, and Korea. </p><p>By looking at the development of the brokerage sectors in these three countries, we observe a general trend where upstart online brokers first compete against the more established brokers based on their cost and technological advantages. This then pushes the more established brokers to either focus on more lucrative wholesale businesses or adopt and invest in tech initiatives in order to stay competitive in the retail market.</p><p>After further establishing themselves in the retail market, these upstart online brokers then also diversify and expand into the more lucrative wealth/asset management or even wholesale businesses.  By gauging at which phase the broker is in this cycle, investors can have a good understanding of its future outlook.</p><p>In our opinion, Korean brokers currently offer the best value, while the Chinese pure-play online brokers offer the highest growth potential. As such, our pecking order, in terms of investment attractiveness, is <a href="https://www.smartkarma.com/entities/kiwoom-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:20418:1" rel="noopener">Kiwoom Securities (039490 KS)</a>, <a href="https://www.smartkarma.com/entities/east-money-information-co-a" target="_blank" data-smartkarma-citation="entities:8075:1" rel="noopener">East Money Information Co A (300059 CH)</a>, <a href="https://www.smartkarma.com/entities/futu-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27858:1" rel="noopener">Futu Holdings Ltd (FUTU US)</a>, <a href="https://www.smartkarma.com/entities/monex-group-inc" target="_blank" data-smartkarma-citation="entities:14211:1" rel="noopener">Monex Group Inc (8698 JP)</a> / <a href="https://www.smartkarma.com/entities/huatai-securities-co-ltd-h" target="_blank" data-smartkarma-citation="entities:449:1" rel="noopener">Huatai Securities Co Ltd (H) (6886 HK)</a>.  </p><h2>What is Original?</h2><p>In this Original, we look into the competitive landscape of the brokerage sectors in China, Japan, and Korea. 55 listed brokers from these three countries are included in this Original as the company universe for regression analysis. </p><p>Among them, a total of 8 brokers are chosen, with their company profiles separately presented, to further showcase and contrast the impact of competition and technological disruption. Based on this, a pecking order is then developed, both on a country and a company basis.</p>

This Original aims to identify the key investment opportunities among the listed brokers in the three major East Asian countries - China, Japan, and Korea. By looking at the development of the brokerage sectors in these three countries, we observe a general trend where upstart online brokers first compete against the more established brokers based on their cost and technological advantages. This then pushes the more established brokers to either focus on more lucrative wholesale businesses or adopt and invest in tech initiatives in order to stay competitive in the retail market.After further establishing themselves in the retail market, these upstart online brokers then also diversify and expand into the more lucrative wealth/asset management or even wholesale businesses.  By gauging at which phase the broker is in this cycle, investors can have a good understanding of its future outlook.In our opinion, Korean brokers currently offer the best value, while the Chinese pure-play online brokers offer the highest growth potential. As such, our pecking order, in terms of investment attractiveness, is Kiwoom Securities (039490 KS), East Money Information Co A (300059 CH), Futu Holdings Ltd (FUTU US), Monex Group Inc (8698 JP) / Huatai Securities Co Ltd (H) (6886 HK).  What is Original?In this Original, we look into the competitive landscape of the brokerage sectors in China, Japan, and Korea. 55 listed brokers from these three countries are included in this Original as the company universe for regression analysis. Among them, a total of 8 brokers are chosen, with their company profiles separately presented, to further showcase and contrast the impact of competition and technological disruption. Based on this, a pecking order is then developed, both on a country and a company basis.

Asian Brokers: A Competition Between Value and Growth

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Futu Holdings Ltd / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/futu-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27858:1" rel="noopener">Futu Holdings Ltd (FUTU US)</a> is a leading online brokerage and wealth management platform in Hong Kong which is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> (owns 22.8% of ordinary shares, 27.9% of voting power). Futu has launched an ADS follow-on to sell 9.5 million ADSs. At the last close price of $177.92 per ADS, the placing would raise gross proceeds of $1.7 billion.   </p><div class="content-highlight"><p>Investors who participated in the last placing of 9.5 million ADSs at $33.00 per ADS in August 2020 have done incredibly well. Despite the strong share price momentum, we continue to think that the large addressable market opportunity, favourable market conditions and ongoing market share gains should help Futu sustain its momentum. Consequently, we would be tempted to participate in the follow-on ADS offering. </p></div>

Futu Holdings Ltd (FUTU US) is a leading online brokerage and wealth management platform in Hong Kong which is backed by Tencent Holdings (700 HK) (owns 22.8% of ordinary shares, 27.9% of voting power). Futu has launched an ADS follow-on to sell 9.5 million ADSs. At the last close price of $177.92 per ADS, the placing would raise gross proceeds of $1.7 billion.   Investors who participated in the last placing of 9.5 million ADSs at $33.00 per ADS in August 2020 have done incredibly well. Despite the strong share price momentum, we continue to think that the large addressable market opportunity, favourable market conditions and ongoing market share gains should help Futu sustain its momentum. Consequently, we would be tempted to participate in the follow-on ADS offering. 

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<div>
<p><a href="https://www.smartkarma.com/entities/27858" target="_blank" data-smartkarma-citation="entities:27858:1" rel="noopener">Futu Holdings Ltd (FHL US)</a> aims to raise around US$1.7bn to support its margin financing and other businesses.</p>
<p>We covered the previous placement which took place in Aug 2020 in:</p>
<p><a href="https://www.smartkarma.com/insights/futu-holdings-placement-riding-high-on-momentum" target="_blank" rel="noopener">Futu Holdings Placement - Riding High on Momentum</a></p>
</div><div><p>We also covered the company's IPO in 2019: </p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/futu-holdings-pre-ipo-great-metrics-but-in-a-commoditised-industry" target="_blank" rel="noopener">Futu Holdings Pre-IPO - Great Metrics but in a Commoditised Industry</a>, </li>
<li>
<a href="https://www.smartkarma.com/insights/futu-holdings-pre-ipo-fy18-updates-and-quick-thoughts-on-valuation" target="_blank" rel="noopener">Futu Holdings Pre-IPO - FY18 Updates And Quick Thoughts on Valuation</a>,</li>
<li>
<a href="https://www.smartkarma.com/insights/futu-holdings-ipo-given-the-team-execution-and-backers-might-be-worth-a-look-at-the-low-end" target="_blank" rel="noopener">Futu Holdings IPO - Given the Team, Execution, and Backers, Might Be Worth a Look at the Low-End</a>, and</li>
<li><a href="https://www.smartkarma.com/insights/futu-holdings-ipo-quick-note-comparison-with-tiger-brokers-same-market-different-economics" target="_blank" rel="noopener">Futu Holdings IPO Quick Note - Comparison with Tiger Brokers - Same Market, Different Economics</a></li>
<li><a href="https://www.smartkarma.com/insights/futu-holdings-ipo-trading-update-might-be-trading-a-little-too-high" target="_blank" rel="noopener">Futu Holdings IPO Trading Update - Might Be Trading a Little Too High</a></li>
</ul></div><div><p>In this note, we will talk about the deal dynamics.</p></div>


Futu Holdings Ltd (FHL US) aims to raise around US$1.7bn to support its margin financing and other businesses.
We covered the previous placement which took place in Aug 2020 in:
Futu Holdings Placement - Riding High on Momentum
We also covered the company's IPO in 2019: 

Futu Holdings Pre-IPO - Great Metrics but in a Commoditised Industry, 

Futu Holdings Pre-IPO - FY18 Updates And Quick Thoughts on Valuation,

Futu Holdings IPO - Given the Team, Execution, and Backers, Might Be Worth a Look at the Low-End, and
Futu Holdings IPO Quick Note - Comparison with Tiger Brokers - Same Market, Different Economics
Futu Holdings IPO Trading Update - Might Be Trading a Little Too High
In this note, we will talk about the deal dynamics.

Futu Holdings Placement - Very Strong Momentum but Previous Deal Did Nothing

Equity Analyst, Investi Analyst

Investi Analyst

Equity Analyst

Investment Entrepreneur / Equity Analyst.

Equity Bottom-Up

<ul><li>The rise in retail investing globally for the likes of Robinhood also bodes well for Futu in a country with over 1.3 billion people in population.</li><li>The rapid growth in wealth for the middle-class in China presents robust opportunities for Fintech brokerage firms like Futu Holdings.</li><li>Futu grew 2020 revenues by a stunning 212% YoY. This article analyzes Futu's financial year and key competitive differences with Tiger Brokers.</li><li>In an environment where interest rate yields are rising, financial institutions and broker dealers have historically outperformed, which bodes well for Futu Holdings.</li></ul>

The rise in retail investing globally for the likes of Robinhood also bodes well for Futu in a country with over 1.3 billion people in population.The rapid growth in wealth for the middle-class in China presents robust opportunities for Fintech brokerage firms like Futu Holdings.Futu grew 2020 revenues by a stunning 212% YoY. This article analyzes Futu's financial year and key competitive differences with Tiger Brokers.In an environment where interest rate yields are rising, financial institutions and broker dealers have historically outperformed, which bodes well for Futu Holdings.

Futu Holdings: Hypergrowth Fintech Ready To Take Off In A Rising Rate Environment

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

<p>After <a href="https://www.smartkarma.com/entities/li-auto-inc" target="_blank" data-smartkarma-citation="entities:28812:1" rel="noopener">Li Auto Inc. (LI US)</a>  IPO in the US on July 30<sup>th</sup>, another Chinese EV IPO is imminent in next few weeks – <a href="https://www.smartkarma.com/entities/guangzhou-xiaopeng-motors-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng Motors (XPEV US)</a> (IPO expected in Aug).  Xpeng is dealing with a couple of ongoing allegations of IP thefts from <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> . Last year, a former software engineer at Tesla downloaded over 300k classified files including the copy of Autopilot source code just before leaving the US to work as “the Head of Perception” at Xpeng.  In 2018, a former senior hardware engineer at Apple Autopilot program took confidential files including detailed schematic drawings of a circuit board and joined Xpeng after returning to China. Both stories are well reported by Chinese media and couple potentially have negative impact on the company’s branding. It’s not clear how long the pending lawsuits will linger in the US and if there will be a resolution.  Neither of the suspect is working at Xpeng now, although the management included employee misconduct in the Risk Factors in S1.  According to our checks, orders for XPeng (G3 and P7) exiting July was ~1,500, vs 2,276 delivery in June.  Delivery in June was not an accurate indicator of demand.  It is likely to be upped as XPeng prepares for its IPO.  P7 (compact sports sedan) competes directly with TSLA MIC M3 in pricing, range and features.  So why would or should consumers buy TSLA knockoff if the real thing is selling at similar prices. </p>

After Li Auto Inc. (LI US)  IPO in the US on July 30th, another Chinese EV IPO is imminent in next few weeks – Xpeng Motors (XPEV US) (IPO expected in Aug).  Xpeng is dealing with a couple of ongoing allegations of IP thefts from Tesla Motors (TSLA US) . Last year, a former software engineer at Tesla downloaded over 300k classified files including the copy of Autopilot source code just before leaving the US to work as “the Head of Perception” at Xpeng.  In 2018, a former senior hardware engineer at Apple Autopilot program took confidential files including detailed schematic drawings of a circuit board and joined Xpeng after returning to China. Both stories are well reported by Chinese media and couple potentially have negative impact on the company’s branding. It’s not clear how long the pending lawsuits will linger in the US and if there will be a resolution.  Neither of the suspect is working at Xpeng now, although the management included employee misconduct in the Risk Factors in S1.  According to our checks, orders for XPeng (G3 and P7) exiting July was ~1,500, vs 2,276 delivery in June.  Delivery in June was not an accurate indicator of demand.  It is likely to be upped as XPeng prepares for its IPO.  P7 (compact sports sedan) competes directly with TSLA MIC M3 in pricing, range and features.  So why would or should consumers buy TSLA knockoff if the real thing is selling at similar prices. 

XPeng IPO Preview: TSLA Copycat, 1500 Orders Exiting July

United States

UP Fintech Holding Limited operates as a holding company. The Company, through its subsidiaries, provides online securities brokerage services. Up Fintech Holding serves customers in China.

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UP Fintech (TIGR US)

Asian Brokers: A Competition Between Value and Growth

The Original looks into the current competitive landscape of the brokerage sectors in China, Japan, and Korea, with a view to developing a list of...

Alec Tseung

Futu Holdings Placement: Going Places

Futu has launched an ADS follow-on to raise gross proceeds of $1.7 billion. Overall, we would be tempted to participate in the follow-on ADS offering.

Arun George

Futu Holdings Placement - Very Strong Momentum but Previous Deal Did Nothing

Futu Holdings Ltd (FHL US) aims to raise around US$1.7bn to support its margin financing and other businesses. In this note we will talk about the...

Sumeet Singh

Futu Holdings: Hypergrowth Fintech Ready To Take Off In A Rising Rate Environment

The rise in retail investing globally for the likes of Robinhood also bodes well for Futu in a country with over 1.3 billion people in...

Investi Analyst

XPeng IPO Preview: TSLA Copycat, 1500 Orders Exiting July

After Li Auto Inc. (LI US) IPO in the US on July 30th, another Chinese EV IPO is imminent in next few weeks – Xpeng Motors (XPEV US) (IPO expected...

JL Warren Capital

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