China's Robinhood rivals are set for massive stock market gains on global expansion

Published Thu, Apr 15 20217:09 PM EDT

Evelyn Cheng @in/evelyn-cheng-53b23624 @chengevelyn

Key Points

From the GameStop stock trading frenzy earlier this year to digital currency exchange Coinbase's listing Wednesday, individuals are increasingly interested in playing capital markets, which are now easily accessible through a variety of mobile apps.
Two Chinese-run stock trading apps plan to tap new users in Singapore and the U.S.

BEIJING — Chinese-run stock trading apps are riding a surge of global interest in day trading, as competition grows for Robinhood. Futu and Tiger Brokers , both listed in the U.S., launched a few years ago as apps allowing Chinese users to trade U.S. or Hong Kong stocks. Now both are forecasting hundreds of thousands of new users this year — mostly from outside China. From the GameStop stock trading frenzy earlier this year to digital currency exchange Coinbase's listing Wednesday , individuals are increasingly interested in playing capital markets, which are now easily accessible through a variety of mobile apps. Here's how much analysts expect the Chinese players in this industry to climb. Tiger Brokers Also known as UP Fintech, Tiger Brokers slid more than 4% on Thursday to close at $18.92 a share. That still leaves about 50% upside to reach China Renaissance's newly updated price target of $30. Analyst Jacky Zuo raised the firm's target from $26.50 a share in an April 8 report based on higher earnings expectations for Tiger Brokers. The company announced in late March its total number of funded accounts more than doubled in 2020 to reach 258,700. This year, Tiger Brokers expects that pace of growth will speed up with more than 350,000 new funded accounts, with international clients accounting for more than 50% of those additions. Outside of China, the company is focused on Singapore, the U.S. and Australia. Tiger Brokers plans to expand on a base of ethnic Chinese users overseas, Tianhua Wu, chairman and CEO, said in an interview last Friday. He said game-like features such as "King of the Street" labels for high-performing users have attracted a younger crowd, and about 60% to 70% of users worldwide are under age 35. One of the main differences between the Chinese stock trading apps and other mobile-based trading platforms is the emphasis on a social community. "Compared with American brokerages, the biggest difference is these two companies have their own user community and have put greater effort into these social community services," said Xin Jin, one of many investing experts who regularly shares research and analysis on Tiger Brokers' app, and the founder of a U.S. stock investment consultancy for Chinese investors called Puyang. That's according to a CNBC translation of his Chinese comments. He added that the rapid emergence of China's middle class in a world where different countries offer varying risks has increased global investors' demand for personal financial management. Futu Shares of rival stock trading app Futu slipped 3% Thursday to close at $148 a share, leaving about 30% to run to reach China Renaissance's new price target of $200 a share — $35 higher than before. For Futu, its social community is contributing directly to more trades. Socially active clients traded 5 times more than non-socially active clients, China Renaissance's Zuo said in an April 9 report, citing a half-day investor call with Futu management a day earlier. Active users spent an average of 38 minutes on Futu's app per trading day in the fourth quarter of last year, and daily active users reached 1 million in February, the report said. The company also more than doubled the number of paying users in 2020, for a total of 516,000. Futu expects to add 700,000 new paying clients this year, with 20% coming from outside Greater China in Singapore and the U.S. A representative from Futu was not available for an interview in time for publication. "We prefer Futu over Tiger given the former's greater exposure to the HK market; we regard acquiring a HK license as a key stock catalyst for Tiger," Zuo said in a report. Risks and competition The international expansion goes both ways. For example, U.S.-based Interactive Brokers , an industry giant which invested in Tiger Brokers early on, told CNBC in December that 80% of new accounts come from countries outside the U.S. And for popular new products such as cryptocurrencies that Coinbase and Robinhood offer, it's illegal to trade them in China. Tiger Brokers' Wu said the company is looking into virtual currency trading overseas. Overseas expansion also raises costs. Citi analysts said in a March 28 note that Tiger's "aggressive overseas expansion" will increase staff costs by 60% this year as the company must hire more high-paid, senior staff in overseas markets. Citi cut its price target to $21.63 a share, down from $38.60. In the long run, one significant difference between the the Chinese stock trading apps and their international competitors is a strategy to go beyond individual stock trading and into the big business of investment banking. Already, Futu and Tiger work with major Chinese companies in their initial public offerings and start-ups for managing employee stock option plans. Futu participated in 10 IPOs in the fourth quarter of last year, while Tiger participated in eight, according to China Renaissance.

Traders on the floor of the New York Stock Exchange.

Source: NYSE

BEIJING — Chinese-run stock trading apps are riding a surge of global interest in day trading, as competition grows for Robinhood.

Futu and Tiger Brokers, both listed in the U.S., launched a few years ago as apps allowing Chinese users to trade U.S. or Hong Kong stocks. Now both are forecasting hundreds of thousands of new users this year — mostly from outside China.

From the GameStop stock trading frenzy earlier this year to digital currency exchange Coinbase's listing Wednesday, individuals are increasingly interested in playing capital markets, which are now easily accessible through a variety of mobile apps.

Here's how much analysts expect the Chinese players in this industry to climb.