Inovatif

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  • Fed Turns The Tide In War On Inflation, But It’s Too Early To Declare Victory

    Fed Turns The Tide In War On Inflation, But It’s Too Early To Declare Victory

    There has been something for everyone in the recent economic data from the US. Rate hawks concerned about inflation and a tight labour market can point to a fall in the unemployment rate to 3.5%, close to the lowest level on record.

    Meanwhile, doves looking for evidence that the Federal Reserve (Fed) has already done enough will highlight the moderation in payroll growth and average hourly earnings, alongside a fall in job openings. Upward revisions to the weekly initial unemployment claims figures add to the case that the labour market is responding to tighter monetary policy.

    However, whilst the labour market is showing signs of cooling, it remains hot. The number of job openings has fallen below 10 million, but with just under six million unemployed, the ratio of openings to applicants is historically high at 1.7. Likewise, initial unemployment claims may have moved up, but at around 200,000, they are well below the levels associated with a loose labour market.

    The labour market is headed in the right direction but needs to slow considerably further to turn the direction of policy. Judging from the Fed’s latest projections from the 21-22 March meeting of the Federal Open Market Committee this would mean an unemployment rate of at least 4.5%, one percentage point (pp) above current levels.

    At the same meeting, the Fed also discussed the problems in the banking sector and the potential impact of tighter credit conditions on the economy. As chair Jerome Powell remarked in his post-meeting press conference, these events are the equivalent of at least one hike in rates and led the Fed to dial back on a bigger rise in March.

    Markets have stabilised since then and fears of a credit crunch have receded. Alongside the continuing tight labour market, this might encourage the Fed to revert back to a more aggressive tightening path. We would note though, that despite more benign financial conditions, the actual bank lending numbers are weak, with loans to business, real estate and consumers all decelerating sharply over the past three months.

    Although the failure of SVB and other regional banks will have played a role, the origins of the weakness in lending began earlier as banks had been tightening credit conditions for some time. The Senior Loan Officer survey showed a considerable tightening and fall in demand for loans in all these areas back in January this year.

    This supports our view that although the problems in the banking sector have idiosyncratic causes, they are also a symptom of monetary tightening impacting the economy. They are a classic sign that policy is biting. As the IMF indicated at their current gathering, we should be wary of treating recent bank failures as isolated incidents.

    Meanwhile, inflation is falling as headline CPI edged up just 0.1% in March after a 0.4% rise in the previous period, dragging the annual comparison down from 6% to 5%. However, the softening was almost entirely due to the food and energy categories, with food prices flat and gasoline prices falling 4.6% over the month.

    Taking these out of the equation, underlying inflation remained firm. Core inflation rose by 0.4%, broadly unchanged from its pace over the prior three months. Much of this stickiness has been concentrated in the rent of shelter category, which comprises 40% of core CPI. This is moderating, albeit slowly, given the infrequency at which rents are negotiated.

    To get a better gauge of domestic price pressures, our preference is to focus on core services less rent of shelter, given how closely it tracks labour market conditions. Whilst an admittedly noisy and narrow-based measure, it has trended down since the middle of last year and is now running at around 4% on a three-month annualised basis.

    Even so, along with the tightness of the labour market, this is likely to be uncomfortably high for the Fed. Barring another major bank failure, we expect policymakers to focus on inflation and raise rates by another 25 basis points at their next meeting on 3 May. Beyond this, if the recent softening in labour demand is sustained as we expect, then inflation should moderate more convincingly, reassuring the committee that further policy tightening is not required.

    By Keith Wade, Chief Economist & Strategist, Schroders & George Brown, Economist

  • Financial Planning Firms Clone Scams

    Financial Planning Firms Clone Scams

    The public is advised to be wary of dubious investment schemes that use the name of legitimate financial planning firms. Please check the Securities Commission Malaysia website for the latest Alert List.

    The current modus operandi of the scammers are:

    1. Use financial planning companies key names on bogus companies to confuse the public,
    2. Add members of the public to social media chat groups while pretending to be represent legitimate financial planning firms,
    3. Offer dubious investment schemes that promise high returns,
    4. Post bogus investor testimonials to show proof of transfer receipts and making profits to gain the confidence of potential victims.

    It has also come to the attention of the Financial Planning Association of Malaysia (FPAM) that nine financial planning firms who are FPAM’s Corporate Members had their names cloned to promote illegal schemes. Their actual names are:

    1. Wealth Vantage Advisory Sdn. Bhd. (eCMSL/A0349/2018)
    2. Genexus Advisory Sdn. Bhd. (eCMSL/A0338/2017)
    3. Excellentte Consultancy Sdn. Bhd. (eCMSL/A0320/2013)
    4. Alpine Advisory Sdn. Bhd. (eCMSL/A0362/2020)
    5. UOB Kay Hian Securities (M) Sdn Bhd (eCMSL/A0018/2007)
    6. CC Advisory Sdn. Bhd. (eCMSL/A0342/2017)
    7. Harveston Wealth Management Sdn Bhd (CMSL/A0275/2010)
    8. iFast Capital Sdn. Bhd. (eCMSL/A0229/2008)
    9. Kenanga Investors Berhad (eCMSL/A0227/2008)

    To protect yourselves from being scammed, please do the following before making any payments or investments:

    Anyone who have fallen victim to these scams should do the following:

    1. Immediately report to the National Scam Response Centre’s (NSRC) by calling their hotline 997
    2. Report to Securities Commission Malaysia (SC)

    This article is brought to you by Financial Planning Association Of Malaysia (FPAM).

    FPAM is a non-profit organization with a vision and mission to establish the global CFP CERT TM mark as the leading symbol of excellence for personal financial planning and to promote its recognition as a profession to benefit all Malaysians. We also strive to promote Financial Literacy across the breath of the population of Malaysia.

  • Bursa Malaysia And Petronas Sign Memorandum Of Collaboration

    Bursa Malaysia And Petronas Sign Memorandum Of Collaboration

    Bursa Malaysia (“Exchange”) signed a Memorandum of Collaboration (“MOC”) with PETRONAS to help drive environmental, social, and corporate governance (ESG) adoption and practices through Bursa Malaysia’s Centralised Sustainability Intelligence Platform (“Platform”). Working in collaboration with the London Stock Exchange Group (“LSEG”), Bursa Malaysia is developing and testing the Platform which can allow corporates and their listed or non-listed suppliers, both domestically and internationally, to calculate their carbon emissions impact and disclose standardised, common ESG data.

    The purpose of this Platform is to ease companies in their sustainability disclosures and encourage effective management of their carbon emissions, including those from their supply chain, while facilitating decarbonisation through banks’ green financing products and services.

    With the formalisation, PETRONAS would be participating in the Early Adopter Programme (“EAP”) of the Platform to advocate standardised ESG reporting and disclosures while exploring creation of further value throughout its supply chain. Participation in the Platform is envisaged to further reinforce adoption among Malaysian companies through improved ESG data transparency and interoperability.

    PETRONAS will continue to leverage technology and digital to accelerate ESG adoption and readiness across its supply chain to ensure sustainable operational and commercial excellence. These efforts shall be supported by University Teknologi PETRONAS with its fundamental research and academic exchanges.

    The MOC was signed by Datuk Muhamad Umar Swift, Chief Executive Officer of Bursa Malaysia and Datuk Tengku Muhammad Taufik, President and Group Chief Executive Officer of PETRONAS and witnessed by Wong Chiun Chiek, Director, Bursa Intelligence and Aadrin Azly, Vice President of Group Technology and Commercialisation, PETRONAS.

    Datuk Muhamad Umar Swift said, “I applaud PETRONAS, being custodian of Malaysia’s natural oil and gas reserves, in raising the bar to promote sustainable practices in the energy sector. The Centralised Sustainability Intelligence Platform deployed for the collaboration is intended to facilitate and ease PETRONAS’ decarbonisation efforts across its supply chain. We encourage other industry captains, particularly those with significant stakes in the global supply chain, to also tap into this avenue and take the helm for change within their respective verticals.”

    Datuk Tengku Muhammad Taufik said, “PETRONAS strongly believes that a just and responsible energy transition can only be achieved when stakeholders within and across sectors work together. Critically, partnerships with forward-looking entities like Bursa Malaysia will offer a valuable avenue for the entire OGSE sector to further embrace and strengthen ESG compliance for operational improvements. This is increasingly unavoidable to preserve a license to operate in a rapidly transforming energy landscape. Amidst an ever-intensifying push for a lower-carbon future, PETRONAS is determined to continue advocating good governance and transparency among the oil and gas players towards becoming a trusted ESG partner to deliver energy responsibly in a secure, affordable and sustainable manner.”

    Datuk Muhamad Umar Swift added, “Bursa Malaysia is also delighted to have CIMB Group on board for this initiative, continuing our partnership with them under the #financing4ESG programme since May 2022. As part of this collaboration, CIMB Group will offer sustainable supply chain financial solutions to help businesses in PETRONAS’ supply chain adopt low carbon and sustainable practices.”

    This follows the recent signing of Bursa Malaysia’s Memorandum of Collaboration with UMW Corporation Sdn Bhd and Malayan Banking Berhad.

    About Bursa Malaysia

    Bursa Malaysia is an exchange holding company incorporated in 1976 and listed in 2005, and has grown to be one of the largest bourses in ASEAN today. Bursa Malaysia operates and regulates a fully-integrated exchange offering a comprehensive range of exchange-related facilities, and is committed to Creating Opportunities, Growing Value. Learn more at www.bursamalaysia.com.

    About PETRONAS

    We are a dynamic global energy group with presence in over 50 countries. We produce and deliver energy and solutions that power society’s progress in a responsible and sustainable manner. We seek energy potential across the globe, optimising value through our integrated business model. Our portfolio includes cleaner conventional and renewable resources and a ready range of advanced products and adaptive solutions. Sustainability is at the core of what we do as we harness the good in energy to elevate and enrich lives. People are our strength and partners for growth, driving our passion for innovation to progress towards the future of energy sustainability.

  • Bob’s Dilemma: How To Convert Highly Illiquid Assets To More Liquid And Easily Realisable

    Bob’s Dilemma: How To Convert Highly Illiquid Assets To More Liquid And Easily Realisable

    The following story is based on an actual series of events, with some names and circumstances fictionalised. Any similarity to any person’s name, character, or history is coincidental and unintentional. It is about how to convert highly illiquid assets to more liquid and easily realisable.

    Bob and Leonard were the best of buddies. They did everything together in school and through university, including courting the same girl until she decided on Leonard, whereupon Bob graciously withdrew.

    After graduation, Bob worked as a lawyer while Leonard became an engineer. After several years, Bob made a name for himself in law practice, while Leonard decided to leave his job and strike out as an entrepreneur.

    With some inheritance capital and savings, Leonard bought a small but profitable boutique hotel in Kuala Lumpur. At the same time, he embarked on some small development projects building shophouses, small industrial lots and housing schemes in the Klang Valley.

    Five years later, he had the opportunity to purchase a piece of land to build a 200-room resort hotel in Penang, and as this needed a substantial amount of money, he approached Bob to help arrange to finance. Bob recognised the project’s viability and managed to help him secure financing, as well as personally putting up 40% of the capital required by Leonard.

    The hotel was completed and began making money consistently. The company that developed the hotel soon embarked on the construction of an adjoining tower of 150 apartment suites, which units were slowly released for sale.

    No dividends were paid as profits generated from the hotel were ploughed back into the company to finance the apartment tower. Sales of the units had been strong, reaching 70% until the pandemic hit.

    By this time, Bob was in his 50’s and thinking of retirement. During the pandemic, he started thinking a lot about succession. What if he passed on suddenly? How would his family access his assets?

    Read: How A Buy-Sell Agreement Can Help Business Partners In The Future

    Estate Planning Is Crucial: Learn How To Convert Highly Illiquid Assets To More Liquid

    He reached out to me and got an estate plan worked out for when he was not around – some assets to be distributed through his will while some substantial ones were put into a living trust to be distributed in stages to avoid overspending by the beneficiaries. We didn’t discuss yet on the topic of how to convert highly illiquid assets to more liquid.

    But what niggled him was the 40% stake he had in Leonard’s company. His family was unfamiliar with Leonard or his business. Bob realised that after his demise, the close relationship, trust and understanding between the two shareholders would be gone. Which was like saying the two shareholders would be strangers to each other.

    He was worried that his stake, which was now substantial in value, may become worthless after his death in that his family, as minority shareholders, would not be able to influence dividend pay-out, if any, and the company’s direction. And no one other than Leonard would buy a 40% stake at a fair price.

    He felt it would be difficult to impose on Leonard to buy his stake at a time when he needed to fund his business expansion. Hence he felt the need to convert highly illiquid assets to more liquid.

    Read: Money Caused Breakup Among Four Close Friends, That’s Why it Is Important To Plan For The Succession Of A Business

    Convert Highly Illiquid Assets To More Liquid And Easily Realisable

    He talked to me about his dilemma and wondered whether I had a solution. I inquired about the details of the company assets and realised that his solution lay on how to convert highly illiquid assets to more liquid.

    So, I suggested that he propose to Leonard to swap his shareholding with unsold units that Leonard held. He gave a bit of a stunned reaction and said: “I should have thought of that.” And we both worked out what we thought was a fair exchange ratio, using cost instead of profit element (avoiding the need to revalue the hotel and apartment suites).

    We then brought the idea to Leonard, who liked the idea of being free from pesky shareholders if Bob was no longer around, and at the same time, getting rid of unsold stocks. A buy-sell with a trust was set up with our trust company based on the transaction carried out according to the agreed exchange ratio upon Bob’s death or mental incapacity.

    As it turned out, the solution worked after Bob had multiple strokes last year and had to be taken care of by his family, using proceeds from the sale of the apartment suites. Sometimes, I think the best solution is the simplest one.

    In this case, it is about how to convert highly illiquid assets to more liquid and easily realisable.

    Read: Hard Facts About The Executor Of A Will In Malaysia

    About Rockwills International Group

    Rockwills International Group, now in its 28th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in trusts, succession, management and distribution of wealth. It has shareholders’ funds exceeding RM50 million. It has done over 280,000 wills and 15,000 trusts and holds more than RM25 billion in assets under trust.

  • Empowering Gen Z To Work Effectively For Your Organization

    Empowering Gen Z To Work Effectively For Your Organization

    Generation Z is becoming an increasingly influential group to the ever evolving 21st century workforce. What truly motivates this cohort ranging between 18-24 years old to actively participate in their workplace? How do organizations keep them happy and motivated? These are some of the questions that arise when we zero into empowering Gen Z workers.

    Having just stepped into corporate life, they are now at crossroads as they find themselves struggling to adapt to the demands of remote work. According to research, over 33% said that working from home has adversely affected their work life balance and suggest that companies provide necessary tools for them to be more efficient in performing remote work.

    Unlike millennials and baby boomers, they are motivated by an empowering work culture (29.4%), growth potential (28.2%), benefit packages (11.6%), high salary and raises (15.3% as well as personal relationships with co-workers (15.55%).

    Many in fact, prioritize the well being of their mental health, with 82% citing they want mental health days which is a foreign concept to many HR practitioners. 73% cite that they in fact feel alone when it comes to remote work.

    Which is where, as we adapt to the hybrid work era, corporations and employers must decide if setting strict guidelines on when and where employees can work or providing true flexibility and autonomy is the best way to engage and motivate employees. Especially with more Generation Z cohorts joining the workforce and preferring the latter, reports PwC’s Global Workforce Hopes and Fears Survey 2022.

    Therefore, in order to truly maintain the hybrid working balance, here are some suggestions to navigate Mondays to Fridays to allow a balance of both autonomy but also retain some semblance of flexibility.

    Meet-Up Mondays

    Try kick starting the week with a collaborative team meet-up on Mondays, this can definitely be done virtually or otherwise. Success in hybrid work means rethinking collaboration, and according to a recent

    McKinsey study, good workplace performance and higher employee job satisfaction are experienced by companies that prioritize collaborative and communicative environments.

    A Jabra study reveals that collaborative technology, according to 84% of knowledge workers worldwide, will result in a workforce that is more meeting equity friendly.

    Collaboration means giving your employees a voice to show what they are capable of bringing to the table, so remember to not shut them out.

    Traveling Tuesdays

    It’s Tuesday, and employees might be feeling the Tuesday blues already. Terribly long and squeezy commutes to the office for instance may cause stress and anxiety, compared to those who undergo shorter commutes or no commutes at all, according to a report fro[1] m the U.K.’s Office of National Statistics.

    The survey findings of a McKinsey study show that more than half of the workers expressed their desire for their companies to implement a more adaptable hybrid virtual working arrangement.

    In order to ensure that the hybrid experience is consistent throughout the company, regardless of where they are working, 68% of employees worldwide preferred that their employer supplied them with standardized, professional technology instead of forking out their own money for it.

    According to Jabra’s research, 68% of employees preferred if they were outfitted with standardized, professional technology. The Jabra Evolve2 Series is one such device that keeps employees connected and productive with world class audio engineering.

    Wireless noise-canceling audio devices like the Jabra Evolve2 Series will enable employees to maximize their hybrid workspace options without sacrificing productivity.

    Third Space Wednesdays

    As trust between employees, and supervisors grows, more individuals are beginning to work from locations that prove to be most convenient for them. The cafe, on the bus, while waiting for your laundry to be done, or even in your car, working from anywhere you pleased could be an absolute dream given the right tools to turn any space into a productive workplace.

    Prioritizing your mental health and wellbeing comes up top on the list in ensuring that you are able to contribute effectively despite the setting you work from. According to a report from McKinsey, burnout continues to be a recurring effect when it comes to hybrid work with claims from over 49% of employees globally.

    So try generating a workspace that energizes your employees and yourself as well as invest in good audio and video technology that will enable a productive third-space working.

    Focus Thursdays

    While working from home, the office or in a public space, background noises such as colleagues chattering, slamming doors, pots clanking in the kitchen, and so on—can distract employees.

    Distraction may probably be due to the fact that one is half-focused. Try accomplishing one thing at a time and not overwhelm yourself with multiple tasks all at once.

    An effective way to do this is to basically organize them according to top priority. According to a Harvard Business School review, creating a to-do list enables you to recollect tasks in hand that are needed to be accomplished and this eases the stress of having to manually remember them. So go ahead and incorporate colors or checkboxes just to make the process more fun. Additionally, using online sticky notes or google task bars can work just as well.

    Home Fridays

    Who doesn’t love Fridays? While still working on a hybrid mode, employees might turn down their moodiness a notch since it’s basically the start of the weekend. But despite that ‘TGIF’ feeling, there may still be a long list of back-to-back conference calls and team meetings to attend to.

    According to a global survey of executives, employee experience experts, and knowledge workers, about 76% expected an increased use of video meetings as a result of the Covid-19 pandemic. Understandably, since teams do not get to see one another face-to-face during hybrid working, the best way possible to ensure connectivity and engagement is definitely to switch on the video camera.

    Therefore, using the right tools to make sure we always look and feel our best is essential, and built-in cameras on our phones and laptops won’t be enough for a more long-term hybrid working arrangement.

    According to research, 73% of Gen Z have cited they feel lonely while working remotely. This is where balancing workdays as well as premium video conferencing equipment such as The Panacast 20, enables them to feel included and represented during meetings. 

    More than ever, leaders must now embrace flexibility, by not only allowing employees to do so but also enabling them to.

    Seeing how more Generation Z natives are entering the workforce, the need to grow accustomed to the hybrid work ways is important. Therefore gradually empowering them through technology that could produce greater engagement and better retention is the way to go.

    By Agnes Koh, Regional Product Marketing Manager, APAC, Jabra.

    About Jabra

    Jabra is a world leading brand in audio, video, and collaboration solutions – engineered to empower consumers and businesses. Proudly part of the GN Group, we are committed to bringing people closer to one another or to whatever is important to them. Jabra engineering excellence leads the way, building on 150 years of pioneering work within GN. This allows us to create integrated tools for contact centers, offices, and collaboration to help professionals work more productively from anywhere; and true wireless headphones and earbuds that let consumers better enjoy calls, music, and media. GN, founded in 1869, operates in 100 countries and delivers innovation, reliability, and ease of use. GN employs more than 7,500 people and in 2022 reported annual revenue of DKK 18.7bn. GN Audio accounts for DKK 12.5bn.

    GN brings people closer and is Nasdaq Copenhagen listed. www.jabra.com

  • Going Beyond Training: Change-Driven Programs

    Going Beyond Training: Change-Driven Programs

    One of the benefits of being in the learning and development field is the opportunity to have the pulse of the key challenges facing organizations.  As I speak to the very top, I have the privilege of getting the views right from the CEOs themselves. 

    Often in a heart-to-heart talk to CEOs and after all the niceties and pretences, they are all willing to be open in their views with regards to training. Here are some of the common misgivings they have about training:

    • Most training at best is just knowledge enhancement and skill-building.
    • Many participants who are trained do not put into practice what they have learned.
    • Whatever they call them be it training or learning and development, many of these programs do not bring about the desired organizational change.
    • Most learning and development programs do not provide a structure and a process to bring about change
    • Many trainers do not understand the issues facing the clients and the industries they are in.

    However, the good news is that training service providers who provide Change-Driven Programs (CDP) are more effective in bringing about positive and productive change in organizations. What is a CDP? 

    It is a fully customized change-driven program for the company in the specific industry it operates. Unlike the limited role of a training program, a CDP includes an industry analysis, organization diagnosis, change action plan development, and the measurement and monitoring of the progress of change implementation after the session.  

    Our company, KL Strategic Change Consulting (KLSCC) Change-Driven Approach in training comprise 4 components. 

    Organization Diagnosis

    Prior to the conduct of the training, the consultant or subject matter expert will meet up with the company to understand the challenges it faces.  He or she will request an organization diagnostic survey to a representative group of the company to ascertain the root causes of the issues and the barriers to change.    

    The survey is conducted in an anonymous manner to allow frank input with regard to the real issues facing the organization and its specific needs.    While the conduct of the organization diagnosis may take time, it is certainly worth the effort, as this will enable the CDP to be conducted in a more effective manner.  

    Industry Analysis

    An analysis is also done on the industry the client operates in. This involves studying the trends, challenges, and growth potential of the industry.  Likewise, an analysis is also conducted on the client’s competitors.

    This includes understanding the degree of intensifying competition in the markets, the regulations, technology, and globalization’s impact on the client’s company.  There is an agreement with the client to choose which competitor it wants to benchmark against. 

    This is very useful is it provides a clear focus on the changes the company needs to drive towards and the standard it needs to raise to be at par with.  

    Change Action Plans

    The problem with most training programs is that everything ends at the conclusion of the training. The missing link is action plans to address the issues and challenges facing the organization. 

    In a CDP, during the session, the consultant will facilitate a discussion, and assessment and come to a joint agreement with the participants on the specific action plans.  Often in a session say of 25 participants, they will be divided into 5 groups.  Each group will come up with an action plan to address specific issues.

    For example, one group may address communication issues, another may address staff morale issues and yet another may address the processes in the organization. Each group will discuss and come up with solutions to address these issues and convert them into action plans with specific activities, deadlines, and assigned responsibilities to individuals or teams.

    Measure and Monitor Progress

    The management guru, Peter Drucker said it well, “You cannot manage what you do not measure”.  To go beyond training, a CDP does not just stop at the end of the session. 

    The consultant ensures that all the action plans are forwarded to the head of human resources and the former will also monitor and follow up with the respective teams regarding the progress of these action plans. It has been proven that people are more committed to putting to practice what they have learned if they know that someone shows an interest and is measuring and monitoring the progress of what they are doing.   

    Hence it is no surprise that in many of our CDPs conducted, our clients have given testimonies sharing their experiences of positive and productive change in their workplace.  Our work has been recognized by The Brand Laureate International with an award for our company, KL Strategic Change Consulting Group as the consulting and training company that provided the greatest impact on positive and profitable change for organizations in Malaysia.

    Receiving the award on behalf of KL Strategic Change Consulting Group. The Company that made the most positive and profitable impact for corporations.

    For learning and development to be effective, it must go beyond training. It must address the actual business needs of the organization in the specific industry in which it operates.

    It must identify the real issues and the root causes that are preventing the organization and its people from changing. It must engage the participants in coming up with joint solutions and action plans to resolve these issues and bring about change. 

    Their action plans must have expected outcomes with specific measures of success with persistent follow-up actions until these goals are achieved.    

    About the Author

    Ms. Jane CM Bee is the Executive Director of KL Strategic Change Consulting Group. She has extensive experience in marketing consulting and training services to clients in Brunei, Indonesia, Thailand, Singapore, and Hong Kong. She is currently managing a CDP called, “Implementing Successful Change in Organizations”. For feedback on this article email her at janebee@klscc.com or contact her at 012-2685212.

  • The Oil Market And Your Investment

    The Oil Market And Your Investment

    Strategic petroleum reserves exist in the care of governments around the world. The largest and unheard of by most retail investors is the U.S. Strategic Petroleum Reserve. Today, we will look closer at the oil market and your investment.

    The U.S. Strategic Petroleum Reserve (SPR) is one of the world’s largest crude oil stockpiles. Conceived as a defensive weapon against geopolitical crises in the ’70s, the SPR’s purpose and function have evolved. It is a massive stockpile of crude oil based mostly in four major locations around the Gulf Coast.

    The SPR is a “tremendously unique asset” and argues that U.S. Congress-mandated sales are ill-conceived. The SPR is a defensive weapon against geopolitical crises, and its purpose and function have evolved. Energy investors need to know about today’s volatile oil market and how it affects the SPR.

    The Oil Market And Your Investment: Why Is US SPR Important?

    The SPR is important because it provides a strategic and economic advantage for the United States. It is a defensive weapon against geopolitical crises, and its purpose and function have evolved. The SPR’s importance lies in its ability to cushion against sudden oil supply disruptions and price spikes. It also provides a strategic advantage by allowing the U.S. to respond to global oil market disruptions with greater flexibility and speed.

    The SPR has been used to mitigate the impact of oil supply disruptions caused by geopolitical crises. For example, it was used during the Gulf War in 1991 and Hurricane Katrina in 2005. During the Gulf War, the U.S. released oil from the SPR to offset the loss of oil supplies from Iraq and Kuwait. During Hurricane Katrina, the SPR was used to help refiners in the Gulf Coast region affected by the hurricane to maintain operations.

    The Oil Market And Your Investment: How Does US SPR Work?

    The SPR works by storing crude oil in underground salt caverns in four major Gulf Coast locations. The SPR has a current capacity of 713.5 million barrels of crude oil. The Department of Energy (DOE) manages the SPR and is responsible for maintaining the stockpile. The DOE also has the authority to release oil from the SPR in response to supply disruptions or other emergencies threatening the U.S. economy or national security.

    The Oil Market And Your Investment: Difference Between SPR and OPEC+

    The U.S. Strategic Petroleum Reserve (SPR) is a massive stockpile of crude oil based mostly in four major locations around the Gulf Coast. It was conceived as a defensive weapon against geopolitical crises in the ’70s, and its purpose and function have evolved.

    On the other hand, OPEC+ is a group of oil-producing countries that includes members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries. The group was formed in 2016 to coordinate oil production and stabilize prices.

    The SPR is a stockpile of crude oil owned by the U.S. government and used to help stabilize oil prices during times of crisis. OPEC+ is a group of countries working to coordinate oil production and stabilize prices.

    Read: Lessons From Silicon Valley Bank (SVB) and Lehman Brothers: How Islamic Financial Principles Offer More Robust Risk Management In Investments

    The Oil Market And Your Investment: Weakening US Dollar May Further Impact Price Of Oil & Inflation

    The weakening of the US dollar can lead to an increase in commodity prices, especially crude oil prices. This can lead to inflation as higher oil prices can lead to higher transportation costs and higher prices for goods and services. The Federal Reserve aims to keep inflation under control by adjusting interest rates. The Federal Reserve may increase interest rates to slow economic growth and reduce inflation if inflation rises too much. However, if inflation remains low, the Federal Reserve may keep interest rates low to encourage economic growth.

    So, a weakening US dollar can lead to higher commodity prices and inflation. The Federal Reserve aims to keep inflation under control by adjusting interest rates.

    Carley Garner, Senior Commodity Strategist discussed on Bloomberg Television recently, has put US$80 oil price is pivotal. A close above US$81 likely leads prices into the high US$90.00s. Such as positive seasonality and speculators having plenty of buying power. In such an environment, the fundamental stories everyone has been talking about will matter.

    The Oil Market And Your Investment: Rising Inflation And Your Investment

    Inflation can affect investment returns. Inflation also impacts the returns that an investor earns on the investments he or she makes. Therefore, the concept of inflation-adjusted or real returns is important for all investors to comprehend.

    Put simply, real return = nominal return less inflation.

    Inflation lowers your returns and has led some investors to favor high-return investments and investments with inherent value, like real estate. It also has some investors keeping as little money as possible in the bank because money constantly loses value.

    Read: SPY vs SPUS: A 2023 Comparison of S&P 500 ETFs

    The Oil Market And Your Investment: What Should You Do?

    Asset allocation is an investment strategy that balances risk and reward by dividing an investment portfolio among asset categories such as stocks, bonds, and cash. The goal of asset allocation is to minimize risk while maximizing returns. It is important because it helps investors diversify their investments and reduce the impact of market volatility on their portfolios. By investing in a mix of assets that have different levels of risk and return, investors can achieve a more stable return over time.

    Asset allocation can be done differently depending on an investor’s goals, risk tolerance, and investment horizon. Some investors prefer a more aggressive approach with a higher percentage of stocks in their portfolio, while others prefer a more conservative approach with a higher percentage of bonds and cash.

    It is important to note that asset allocation does not guarantee a profit or protect against loss. However, it can help investors achieve their long-term financial goals by reducing risk and increasing returns over time.

    Rather than putting everything into the oil market and your investment, perhaps it is time to look at other commodities as an alternative. One such alternative is investing in gold, where Carley Garner further adds the price of gold could potentially break out the US$2,100 level with the best target towards US$2,600 by or before 2024. She projected that such a move is possible with two main factors, the weaker dollar and political uncertainty.

    Well, there you have an update about the oil market and your investment.

    Read: Investing With Recession Fears Looming, Are We Nearing Market Bottom?

    About the Author

    Mukhriz Mangsor is currently the Head Global Market Strategist at Quantdynamic Research Company. His expertise includes financial education, financial institutions, and property trading with clients, including Brunei, Canada, Malaysia, Singapore, and the United States firms.

  • Oyen Pet Insurance: Not Just Another Insurtech

    If you were to ask a random person on the street if they own a pet and a personal insurance policy, there is a decent chance of the answer being yes. However, if you were to ask if they have pet insurance, the chance of an affirmative response is very likely to be low.

    Although many Malaysians still do not have any form of insurance, the average family is still likely to be covered with a medical or life insurance policy. But when it comes to insurance for pets such as cats and dogs, that is a whole other matter.

    Kevin Hoong Michelle Chin Oyen
    Oyen co-founders (l-r): Kevin Hoong, Michelle Chin

    This is where Oyen  comes into the market, with the company aiming to carve up a niche for themselves in the insurance sector. While the pandemic may have wreaked havoc on the economy, if it was not for this black swan event, the insurtech firm may never even have come to life.

    Michelle Chin, the co-founder of Oyen, recalls seeing almost everyone in her social circle introducing a pet into their lives as a result of the pandemic.

    “One of our friends adopted a second cat, and the cat was found to be suffering from liver disease and she spent a lot of money on treatments,” recalls Chin.

    This resulted in the other co-founder of Oyen, Kevin Hoong, wondering why there was a lack of pet insurance as a product. With a family background in insurance spanning 40 years, he was certainly well-placed to gauge the feasibility of spearheading the growth of a niche vertical.

    “We found out that there was one insurance company offering it in Malaysia – MSIG,” she remembers.

    “We then indicated our interest to launch a unique product offering with a niche focus on pet health, and the rest was history!”

    As for their friend’s cat, Chin shares that she has made a full recovery and is now insured with Oyen!

    How it works

    Claiming to be the “best pet insurance in Malaysia”, Oyen certainly works to live up to that tagline. It pays up to RM8,000 towards the cost of pet veterinary bills, which includes consultation, diagnosis, and treatment at the clinic and hospital.

    The more premium coverage plans also covers third-party injury; that is when your pet causes damage to the property of others or even other pets! This will include any legal fees, compensation and related medical costs up to RM30,000 for cats and RM50,000 for dogs.

    In addition, even the funeral expenses for your pet are covered under the premium coverage, which includes the burial plot and columbarium.

    Oyen is also transparent about what its pet insurance plan does not cover, listing all of these restrictions on its landing page; this includes aids and prosthetics, congenital conditions and surgical implants to name just three.

    Like many other insurtechs, it also strives to use simple language to convey the extent of coverage that your pet will receive. Such simplicity is at the heart of Oyen, which like all insurtechs, ultimately aims to simplify the process of purchasing insurance coverage, even for a segment like pets.

    Market challenges

    Running an insurtech company is never a walk in the park, let alone in such a niche like pet insurance, and with it comes a specific set of challenges.

    According to Chin, the biggest obstacle that Oyen faces is the lack of insurance knowledge in Malaysia. This often results in the company having to deal with and educate customers that cannot make head or tail of the insurance or claims processes.

    “We were surprised that 80% – 90% of those who enquire with us, have very limited knowledge of how insurance works,” she shares.

    “For example, we have had a lot of people who ask if they can claim for a vet bill that happened yesterday. Or they may be at the vet right now and they would like us to reimburse the cost!”

    She adds that customers also often ask about covering preventive and routine treatments, the responsibility of which lies with pet owners themselves.

    “Once people understand how the industry works, it is rather straightforward for them to consider getting their pets insured,” says Chin.

    Although the concept of pet insurance is still fairly new and relatively unknown to the wider public, it is not a new product in Malaysia, having been in the market since 2010. Chin says this is proof that insurance companies have already established that the market is big enough for them to introduce such a product.

    “We determined that there is a fast-growing demand segment through a few avenues,” she explains, adding that the pet care market in Asia-Pacific is growing, and is projected to continue growing at a compound annual growth rate (CAGR) of about 10% until 2028.

    “Pet humanisation has been rampant – people no longer treat their pets as pets, but as a family member, and even children.”

    This means that the way that people care for their pets is more extensive than ever before, with many now receiving home-cooked diets or even food prescribed specifically by pet nutritionists. Such pets also receive better healthcare treatments in general which could include pet hydrotherapy, physiotherapy and acupuncture to name a few. Some even go to the extent of conducting DNA tests on their pets to ensure proper lineage!

    “As the cost of pet healthcare increases, due to higher demand for better services and more advanced equipment, the need for pet insurance will increase as well,” predicts Chin.

    As for their future expansion plans, Oyen aims to provide “a holistic ecosystem in pet healthcare”. This means that any growth will be within the confines of the pet healthcare system first and foremost, instead of branching out to other insurance verticals.

    “If there are opportunities that arise from our pet healthcare focus, we will be happy to explore them.”

    When asked about what the long-term game is for Oyen, Chin is very clear as to what her ultimate goal is.

    “Becoming the pet healthcare super app in Asia Pacific!” she says unequivocally.

    Industry thoughts

    As part of the insurtech industry, Chin is certainly building something special in Oyen. However, she believes that there are still some industry blind spots that often get overlooked.

    “There is too much focus on the sexy parts of technology and digitalisation, and not enough on building empathy and simplicity into the user experience,” she notes.

    Her deft observation is that the space is awash with technological innovation, so that is not a weak point that needs to be addressed. However, many insurtechs end up chasing new breakthroughs and often ignore the human element that is required to quickly grow a loyal customer base. Rather than cutting-edge features, ease of use should be prioritised.

    “We need to identify how these technologies or innovations help improve the experience for customers both from a registration and quote journey, as well as claims,” she adds.

    With its customer-first approach, it will be of no surprise to anyone if Oyen continues on its current growth trajectory!

    By Caleb Khew

    A version of this story was published in Smart Investor March/April 2022; issue 372.

    If you liked this article, do check out these other reads on Smart Investor:

  • Budgeting Is So Yesterday: Here’s 3 Intelligent Approaches to Financial Management for Youths

    Budgeting Is So Yesterday: Here’s 3 Intelligent Approaches to Financial Management for Youths

    The usual monthly paycheck, a nice little work bonus, festive allowance from uncles and aunties — we all know the adrenaline rush of having some extra cash on hand.

    But let’s be real: more often than not, that money’s out of the bank just as quickly as it came in! While it could have gone to buying that shiny thing we’ve been eyeing for months, the reality is that many of us young adults know we can’t always blow it all on a luxurious lifestyle. We’re more likely to put it towards a loan we’ve been servicing, or a big (but essential) purchase that’s been put off for months, or even just clearing the monthly mountain of bills.

    In fact, that’s the case for an alarming 73 per cent of Malaysians aged 18 to 40: we’re all repaying some form of debt.

    We can promise ourselves that we’ll just “save more next time”. We can set aside stricter budgets for emergencies and rainy days. But with financial commitments piling up on top of ballooning costs, what else can we do on top of that?

    It’s not entirely about sacrificing that daily dose of coffee or the occasional self-care treat. It’s about knowing where the money should go.

    1. Turning credit cards and BNPL into friends, not foes

    We’ve all heard the horror stories: getting carried away by the convenience of living on credit, enjoying the financial freedom of delaying payment for expensive items that can be purchased immediately. Credit cards and ‘buy now, pay later’ (BNPL) platforms have long had a bad rep as massive debt traps, with some more careful Malaysians even avoiding the latter completely.

    In truth, though, they can actually be quite good for our financial health — as long as we approach them with a slightly different mindset.

    Rather than seeing them as a means to postpone payment (which could awaken the payment procrastinator in us), we as young Malaysians should instead fully leverage our youth and consider them as ways to start building a positive credit score! This is more likely to motivate us to pay our bills on time and reduces the chances of snowballing interest rates. Better yet: it also improves our financial standing for the loans that will really count in the future, like a housing or wedding loan.

    Mastering which purchases to use credit cards or BNPL for can also make us small profits. For instance, by using credit only for certain types of weekly or monthly purchases, we’re more likely to be able to pay each month’s bill in full — which many credit card companies now reward with extra cashback or reward points. Rack them up, and we may just be able to afford a fancy item off their redemption catalogue for free!

    2.  Start investing early, small, and diverse

    Investment can come off as an income stream for older folks who already have some spare money set aside. Less than 35 per cent of young Malaysians consider it a priority, an even smaller proportion than those who are prioritising their own businesses.

    Truth is, though, investing is an important way of growing wealth — which is all the more important now in the face of rising costs. Effective investing is less about the amount of money put into it, but rather about knowing what to invest in to suit your current age group and knowledge of the market. Even the smallest investment can make a huge difference over time.

    Often, young and inexperienced investors can be made to feel like they are “missing out” on more lucrative opportunities or that they are “misplacing” their investments. But I consider investing a lot like swimming: it’s always better to start small than jumping into the deep end from the get-go.

    Low-risk investments like fixed deposits, unit trusts, or Amanah Saham Bumiputera are recommended to start off with, especially since banking staff or trust agents will always be on hand to answer questions or profile any investment needs. Moreover, passive investment apps or platforms can also be a low-effort, digitised way to grow your wealth on the side.

    Dabbling in small-scale investments is a learning experience that can boost confidence to eventually diversify to higher-knowledge or more volatile ones, like the stock and capital markets. (And as always, remember that reward is proportional to risk, so tread cautiously!)

    3. Getting an expert opinion — that understands you

    With so many financial solutions and platforms out there, we’re not only spoilt for choice — we probably wouldn’t even know where to begin! It’s already natural instinct for us to turn to Google or social media to find information, so why not use that to connect with financial advisors that can cut through the noise as well?

    Financial consultancy has come a long way from the middle-aged man with a suit and briefcase. These days, they come in the form of a US$104 billion market: social media finfluencers (financial influencers) and modern advisory firms like Intelligent Consultancy.

    The financial consultant market is becoming increasingly younger, with advisors that are more relatable to the everyday Malaysian youth. They’re easier to connect with and understand: they do away with the fancy jargon, replacing that with easily digestible advice through social media content and personalised consultancy sessions.

    Debt management, personal loans, credit checking, even small business financing — advisors can help young Malaysians manage their financial health and work out payment strategies that work best with the lifestyles we hope to lead. Moreover, consultants and finfluencers may also have their own areas of expertise that can be a valuable source of financial upskilling and knowledge for us: investment security, stock market analysis, and even up-and-coming financing alternatives like Bitcoin or cryptocurrency.

    Even the best athletes have coaches, and for good reason! Financial advisors are uniquely positioned to help us devise strategies that not only meet our needs, but take us to the top: to future lifestyle aspirations, financial ambitions, and the big purchases we want to make — all without giving up that daily coffee.

    About the Author

    Keith Khor Kah Yong, Founder of Intelligent Consultancy

  • Alliance Bank Introduces Innovative Dynamic Card Number In Visa Virtual Credit Card

    Alliance Bank Introduces Innovative Dynamic Card Number In Visa Virtual Credit Card

    Alliance Bank Malaysia Berhad (“Alliance Bank” or the “Bank”) continues to step up efforts to strengthen security of digital transactions with the introduction of Dynamic Card Number in its Alliance Bank Visa Virtual Credit Card. In partnership with Visa Malaysia (“Visa”), CTOS Digital Berhad (“CTOS”), Jirnexu (“RinggitPlus”), YTL Communications (“YES”) and Touch ‘N’ Go Digital (“TNG Digital”), this new payment solution will not only make online transactions more secure, but it will also greatly enhance the overall experience for credit cardholders.

    The enhanced feature generates a randomised 16-digit credit card number for every transaction which includes e-commerce transactions, streaming and subscription services to cater to customers’ various lifestyle needs. As part of Alliance Bank’s Acceler8 strategy, the Bank will continue to drive digital transformation to provide faster, better, and more personalised solutions for customers.

    The single-use Dynamic Card Number offers a more secure and safer way of making daily purchases and minimises the customers’ exposure to fraudulent risks, identity thefts and other  financial scams. Additionally, it also brings about a positive impact to the environment as it reduces production of plastic credit cards and helps to lower credit card footprint on online channels.

    Customers also have the flexibility to determine a dedicated Dynamic Card Number as well as the number of times it can be used for a particular subscription service. This enables customers to track and manage their digital transactions on-the-go more conveniently and securely via their mobile phones.

    “In line with Alliance Bank’s customer-first mindset, we constantly innovate and enhance our  suite of digital solutions to meet our customers’ expanding banking needs, and also deliver a seamless digital payment experience. The new feature on the Alliance Bank Visa Virtual Credit Card provides our customers with greater peace of mind by way of a more secure payment option, addressing concerns of credit card data breach at third party sites when they transact online,” said Ms Gan Pai Li, Group Chief Consumer Banking Officer of Alliance Bank.

    Sharing the same sentiment, Mr Ng Kong Boon, Visa Country Manager for Malaysia, said, “With more Malaysians relying on digital commerce, we believe it is important that they feel empowered and secure when making digital payments. Hence, we have partnered with Alliance Bank on this dynamic card number solution for the virtual credit card. We hope to give customers more confidence as they shop and pay for their purchases online.”

    “The virtual credit card will enable users a smooth experience when fulfilling their payments, reload and purchasing needs. Furthermore, the main edge of the virtual credit card is its dynamic card numbers which is in tandem with TNG Digital’s main aim for being a safe and secure eWallet in line with Bank Negara Malaysia’s standards,” said Mr Alan Ni, Chief Executive Officer of TNG Digital.

    With Malaysia recording 154 data breaches per 100 people in 2022 according to Surfshark, the introduction of the Dynamic Card Number aims to meet the market needs of more personalised and safe mode of payment for goods and services, especially among young professionals.

    The fully online application process is fast and simple, with digital submission of supporting documents such as EPF statements or salary slips. Successful applicants will be notified through a push notification.

    For more information on Alliance Bank Visa Virtual Credit Card or the Bank’s products and services, please visit https://www.alliancebank.com.my/cards/personal/credit-cards/virtual-platinum-credit-card.aspx

    About Alliance Bank Malaysia Berhad

    Alliance Bank Malaysia Berhad and its subsidiary, Alliance Islamic Bank Berhad, offers banking and financial solutions through its consumer, SME, corporate, commercial and Islamic banking, and stockbroking business. The Bank provides easy access to its broad base of customers throughout the country via multi-pronged delivery channels that include retail branches, Privilege Banking Centres, Business Centres, Investment Bank branches, and mobile and Internet banking.