Hong Kong Stock Market Recovery and Cryptocurrency Boost Drive 136% Revenue Surge for Leading Online Broker

Barclays has initiated coverage on a leading online broker in Asia, highlighting its strong growth prospects driven by the recovery of the Hong Kong stock market and the expansion of its cryptocurrency business. The broker is positioned as a combination of Robinhood and Coinbase, with elements of wealth management similar to Fidelity or Charles Schwab.

The recent growth of the broker has been significantly fueled by improvements in the Hong Kong stock market and the introduction of cryptocurrency trading. The Hang Seng Index has seen an approximate 20% rise this year, with daily trading volumes reaching 400 billion dollars, making it the third-largest market globally. The number of IPO applications has also surged, reaching a record high in June. As a leading IPO underwriting broker in Hong Kong, the company has leveraged this channel to acquire new clients at a low cost.

In August 2024, the broker launched cryptocurrency trading services in Hong Kong. Data indicates that the daily trading volume of cryptocurrencies reached 100 million to 200 million dollars in the third quarter and exceeded 350 million dollars in the fourth quarter. Although cryptocurrency trading currently accounts for only about 0.1% of total trading volume, the broker charges higher commission rates for cryptocurrency clients, and this business is expected to become an efficient customer acquisition channel. The company also plans to venture into stablecoin issuance, with Hong Kong recently approving related regulations and having nearly 50 applicants. The broker is expected to be a leading participant in this area.

Despite the current limited contribution of cryptocurrencies, they are seen as a growth catalyst that will help the broker solidify its leadership position in online brokerage. Additionally, the broker is using similar strategies to promote international stock and options trading in markets like Malaysia and Japan. These factors are expected to accelerate growth in the coming years, with Barclays predicting strong revenue growth to help investors capture the digital finance wave in Asia.

The broker initially targeted China Hong Kong but has since expanded to Singapore, Malaysia, Japan, and has a presence in the United States and Australia. China Hong Kong remains its largest market, with approximately 8.7 million paying customers, accounting for 33% of the total. Singapore has 4.3 million customers, accounting for 16%, and Malaysia has 2 million customers, accounting for 7%. The company deepens its penetration through offline stores and product innovations, particularly among older and high-net-worth clients.

In terms of competition, the broker leads against other major players, with the most paying accounts and asset scale. Despite facing local competitors, the broker's pricing strategy and community features, such as real-time data and investor forums, have maintained its market share. Barclays believes the broker is committed to becoming the preferred broker and wealth manager for the mass affluent, with potential future expansion into the United States to compete directly with Robinhood.

The broker's financial performance has been robust, with 2024 revenue reaching 13.6 billion dollars, a year-on-year increase of 136%. Adjusted net income was 5.8 billion dollars. Brokerage commission income accounted for 44%, interest income for 49%, and other income, such as wealth management, for 6%. Key metrics include a total trading volume of 780 billion dollars, a year-on-year increase of 83%, a gross margin of 82%, and an operating profit margin of 51%. Interest income, which depends on customer idle cash and margin financing, accounts for half of the revenue and is influenced by interest rate environments.

Barclays notes that a 25 basis point interest rate cut would reduce pre-tax monthly profits by 800 million to 1 billion dollars, but increased trading volumes could offset some of the negative impact. Barclays forecasts that the broker's revenue will grow by 48% in 2025 to 18.9 billion dollars and by 13% in 2026 to 19.6 billion dollars. The earnings per share (EPS) are expected to be 60.94 dollars in 2025 and 68.66 dollars in 2026.