Online brokerage shares in Asia hit jackpot in global retail mania

The growing retail frenzy has sent many stocks through the roof this year, from the most-shorted US names to anything silver related. But away from the chat rooms there’s another winner: online brokerage shares.

Shenzhen-based Futu Holdings Ltd. has surged 156% already this year and Singapore-listed iFast Corp more than doubled. In South Korea, Kiwoom Securities Co. is up more than 18%. The moves have crushed the performance of a Bloomberg index of the region’s institutional brokerage firms, which is up just 1% over the same period.

The strong performance of this pocket of the market comes amid a rapid increase in the number of young retail investors. More than 50% of Futu’s new users are from the post-1990s generation and more than half are first-time investors, Citigroup Inc. analysts including Daphne Poon noted last week, citing a survey from the brokerage.

The Citi team doubled its Futu target price on Jan 22, after the Tencent-backed company became the only retail-focused broker in the top ten of Hong Kong brokerages by trading volume. The stock is just 2.3% away from Citi’s target price after recent rally.

“With Tencent as its largest outside shareholder, Futu enjoys tech and business support from Tencent,” Zhang Jingyi, an analyst at Bocom International, wrote in an email. “We believe Futu has great growth potential and will deliver good operating results.”

Meanwhile, Seoul-based Kiwoom, whose trading app is popular among South Korea retail investors, doubled the number of its accounts to 7 million last year, amid a more than 30% surge in the benchmark Kospi Index, according to the company.

In addition to the retail frenzy, Singapore’s iFast, a wealth management fintech platform that caters to digital-savvy customers, will benefit from its partnership with Hong Kong’s PCCW Solutions, according to a note from Jefferies Financial Group Inc. PCCW just won the contract to digitize Hong Kong’s retirement fund system.

Jefferies boosted its target price for iFast to $7.80, implying about 15% upside from Tuesday’s levels.

Asia’s online brokerages are benefitting from a surge of retail trading activity in the region, particularly in small-cap stocks. More than 350 billion shares of MSCI Asia Pacific Small Cap Index members changed hands in January, extending a volume spike in December that eclipsed any month since May 2009.