Tencent Holdings Limited (TCEHY)

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Tencent-Backed Chinese Online Brokerage Futu Jumps On Earnings
By: Investor's Business Daily | November 19, 2020

Futu Holdings (FUTU) crushed earnings views for a third quarter in which trading volumes surged amid continued market volatility and a strong market for U.S. and Hong IPOs of Chinese companies. In Thursday's trading, Futu stock jumped.

Futu Earnings

IBD 50 stock Futu, backed by gaming and social media giant Tencent (TCEHY), earned HK$3.09 (39 cents) per ADS, up from HK$0.17 (2 cents) a year ago. Revenue jumped 272% to HK$946.2 million (US$122.1 million). One Wall Street analyst was expecting Futu earnings per share of 4 cents on revenue of $96.73 million, according to Yahoo Finance.

Brokerage commission income increased 356%; interest income rose 140% and other income surged 555%.

In Q3, the Chinese online brokerage and wealth management platform saw the number of paying clients jump 137%. Client assets increased 178%. Daily average client assets rose 152%. Total trading volume vaulted 381%, with U.S. stock trading contributing 56% of the total. Daily average revenue trades shot up 273%. Margin financing and securities lending balance increased 171%. Its wealth management business recorded 29,000 clients as of quarter end.

" The strong IPO market continued to play in our favor," said Futu CEO Leaf Hua Li. He highlighted the U.S. IPOs of Xpeng Motors (XPEV) as well as a couple of Hong Kong IPOs.

Shares of Futu surged 8.1% to 46.47 in Thursday stock market trading. Futu stock topped a second-stage cup base with a 41.09 buy point on Nov. 13 and quickly moved out of buy range, according to MarketSmith chart analysis. A pre-earnings dive Wednesday brought shares back in the buy zone. The relative strength line for Futu stock looks bullish. It's the blue line in the chart shown.

Futu Holdings debuted in March 2019 at 12 in a hot market for Chinese IPOs. The fast-growing Hong Kong-based brokerage taps the growing, newly affluent Chinese middle class, with fully digitized brokerage offerings.

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