On August 31, Morgan Stanley released a research report and maintained an Overweight rating on $Futu Holdings Limited(FUTU.US)$ with a target price of US$163.00.

Morgan Stanley pointed out in the research report:

• Futu's 2Q profit was HK$550mn,  down 53% QoQ (up 127% YoY), as trading volume fell alongside the market while client acquisition costs rose.

• User growth: Paying client addition came in better than market expectations (below 200k) at 211k in 2Q21 (vs. 273k in 1Q21 and Futu's FY21 guidance of 700k).

• Client assets: Average asset per client moderated to HK$0.50mn in 2Q (vs. HK$0.59mn in 1Q), likely as market moderation and dilution from new Singapore clients were partly offset by new money inflows.

Morgan Stanley maintains an Overweight rating on Futu and keeps focus on its long-term growth and users. The investment bank changes the price target to US$163.00.

Risks to the upside:

1) Stronger-than-expected share gains in brokerage and margin finance;

2) Better-than-expected market conditions in HK/ US;

3) Regulatory uncertainties;

4) Secondary listings in HK.

Risks to the downside:

1) Major correction in US/ HK markets;

2) Faster-than-expected expansion of virtual banks in HK brokerage business;

3) Regulatory uncertainties.