IG Group considers entering leveraged securities market in Hong Kong

Maria Nikolova

A local business development team will be established to pursue partnerships and assess the opportunity to enter the leveraged securities market in Hong Kong

Online trading major IG Group Holdings plc (LON:IGG) is setting out its key strategic choices, including plans for expansion in Hong Kong.

The Group has categorised its existing businesses into two groups: core markets and significant opportunities.

In the core markets of the UK, EU (CFDs), Australia, Singapore and non-EU EMEA (Switzerland, Dubai and South Africa), the Group will deploy the levers of segmented target markets, and more local market focus. The revenue from these core markets in FY19 is expected to be around £415 million.

In the EU, IG aims to expand into new products including Options and Turbo 24s through Spectrum, the Group’s MTF.

In the United States, IG aims to leverage the combination of Nadex, IG’s retail FX business and Daily FX.

In Japan, IG will focus on product localisation and marketing, whereas in other Asian markets it will be developing partnerships to access these markets.

The institutional segment will aim for focused proposition for an underserved client segment.

Additionally, the Group has identified a potential opportunity to participate in the leveraged securities market for retail clients in Hong Kong. A local business development team will now be established to pursue partnerships and assess the opportunity to enter the leveraged securities market in Hong Kong.

The revenue from the significant opportunities markets in FY19 is expected to be around £60 million.

The Group is targeting revenue growth at around 3-5% per annum over the medium term in the core markets and an increase in revenue of £100 million, to around £160 million in FY22 in the so-called “significant opportunities”.

Assuming these targets are achieved, the Group’s revenue in FY22 will be around 30% higher than in FY19.

Delivery of this targeted revenue growth will require additional investment. Operating expenses, excluding variable remuneration, are expected to be around £257 million in FY19, and are expected to increase by around £30 million in FY20. This is primarily due to additional investment in prospect acquisition to continue to promote the IG brand, to grow the size and quality of the client base, and to establish the new businesses in the EU and the USA. In subsequent years the Group expects its operating expenses, excluding variable remuneration, to increase at a lower rate than revenue.

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