Hong Kong‘s new stablecoin bill, effective Friday, is igniting excitement among stock analysts, who anticipate a significant boost to Asian crypto trading. The legislation formalizes the process for financial firms to issue and manage stablecoins, virtual assets pegged to fiat currencies, mirroring aspects of the U.S. GENIUS Act.
Morgan Stanley analysts foresee stablecoins primarily driving crypto trading, possibly attracting more institutional investors. They favor online brokerage Futu Holdings, rating it “overweight” with a $164.25 price target. Conversely, citi analysts lean towards Futu’s rival, Up Fintech (Tiger Brokers), upgrading it to “buy” from “neutral” while maintaining a “neutral” rating on Futu due to its recent stock performance.
Both Futu and Up Fintech, which listed in the U.S. in 2019, operate online brokerages for stocks and cryptocurrencies. Despite their mainland china origins, they have shifted focus to Hong Kong and Singapore, navigating Beijing’s capital controls and crypto bans. citi analysts estimate the Hong Kong and Singapore crypto trading market at $640 billion, even accounting for competition from unlicensed exchanges, suggesting Up Fintech and Futu could mirror Robinhood’s success.
Robinhood’s stock surge has been considerably fueled by its crypto trading revenue, which doubled in the first quarter year-over-year, outpacing its overall revenue growth. Crypto’s contribution to Robinhood’s total revenue has grown from 3% in 2020 to 21% by 2024. Robinhood is scheduled to release its earnings soon.
Citi analysts have raised their price targets for both Up Fintech and Futu, to $14 from $9.50 for Up Fintech, and to $176 from $113 for Futu. Their increased optimism for Up Fintech stems from potential collaborations with Avenir Group, an investment firm linked to the founder of the Huobi crypto exchange. Avenir acquired a 5.9% stake in Up Fintech in late April. Citi analysts believe Avenir could leverage Up Fintech for over-the-counter crypto trading and as a designated custodian bank, potentially enhancing Up Fintech’s crypto business development through higher custodian fees.
While acknowledging differences between the U.S. and Hong Kong crypto environments, analysts note Hong Kong’s strategic position as a financial testbed for China. Both Citi and Morgan Stanley anticipate Hong Kong’s stablecoin initiatives will initially focus on facilitating international payments using the Chinese yuan, underscoring the region’s broader global financial ambitions.