As China’s fast-growing middle class flock to diversify their investments beyond local real estate and equities, a Beijing-based startup is making it easy for them to buy US stocks without the typically hefty commissions.
Tiger Brokers, through its app Tiger Trade, enables users to open an account to trade in US stocks in as quickly as three minutes. The app and the relevant information are all in Chinese – a key attraction for Chinese-speaking retail investors who aren’t used to reading complex financial reports in English. Commission starts from $0.0039 per share, with a minimum of $0.99 per transaction.
No wonder Tiger Brokers has won the backing of legendary Wall Street investor Jim Rogers and Interactive Brokers, the largest US online brokerage by trading volume, on top of other leading names like ZhenFund and Xiaomi.
“Tiger is at the right place at the right time,” Rogers said in March 2017 when announcing the deal. Tiger Brokers is the first Chinese startup he has funded.
Buying US stocks is neither banned nor encouraged in China. But the tech-savvy Chinese middle class are more familiar with Google, Apple and Facebook than PetroChina. They naturally want to invest in US stocks, including those of Chinese companies like Alibaba, Baidu, and soon, Xiaomi.
“Cashing in on knowledge”
The early frustrations of Wu Tianhua, founder and CEO of Tiger Brokers, were typical of those of the young Chinese elite.
Then an undergraduate at the prestigious Tsinghua University, Wu was interested in stock investing. However, he found China’s A shares did not reflect the country's economic growth and had limited upside, the stock market being a mix of market and planned economy. In 2010, he received stock options from his employer NetEase, a Chinese internet company listed in the US. That was when Wu became familiar with the US stock market.
He soon realized that although it was an uncommon form of investment then in 2014, putting money in US stocks was one of the best ways for the middle-class Chinese elite like him to allocate their assets against inflation. Consumer-price inflation had accelerated to 2.6% the year before.
Wu called investing in US stocks “cashing in on knowledge” as he and his new middle-class, highly educated peers could make money from their understanding of the internet industry.
Bad user experience
But other barriers remained. In 2014, to open a US stock account entailed a high requirement of liquid assets and a 30-day wait time. The available trading websites only had information and instructions in English, and their information on Chinese technology companies was scant.
Wu later recalled, “By 2014, it was hard to find an industry [in China] like this, which had so many pain points that ran deep and affected every part of the system. Every user experience was unattractive.”
He decided to build his own service; hence Tiger Brokers was born. The move proved undoubtedly popular: Even before the product launch, Wu had received over tens of millions of renminbi from investors.
Mobile, community as key
As an investor himself, Wu knew that creating a mobile- and Chinese-language-friendly product was essential. He also understood that investing is a lonely journey. That was why one of the first few features he added to the app was a community for users to post about their experiences.
He also added other functions to help Chinese users gain information, including a trading guide and an information center about Chinese internet companies.
And to ensure they could control and maintain the best user experience, Wu chose to invest on building a proprietary Tiger Brokers trading system, to facilitate cross-border trading by reducing any lag time to just a few seconds.
All his efforts have paid back. Tiger Brokers is now the go-to app for the Chinese investor interested in US stocks, despite the entry of other players like Baidu’s Stockmaster.
It now has over 1 million registered users in and outside of China. Total trading volume since launch has reached RMB 1 trillion. Annual turnover hit RMB 500 billion in 2017. The app now also offers trading in Hong Kong and China A-shares.
Tiger Brokers last raised some RMB 100 million in Series B+ funding in 2017, and has 300 employees worldwide.
These days, Wu is focused on optimizing Tiger Brokers for new users. The company introduced over 60 iterations of its app within just three months, from July to September 2017. For, says Wu, a successful broker is one who has made the most number of customers rich because of his work.