Inovatif

Author: admin

  • Investment Options for Young Investors

    Investment Options for Young Investors

    Young investors (or any beginner investor) will often ask: “What should I invest in?”

    If you are a millennial, the idea of investing your hard-earned money can come across as complex or perhaps intimidating. While it is important to secure your future, how do you go about doing it?

    Unlike previous generations, millennials are comfortable with technology and the convenience emanating from their smart devices. They enjoy co-working and travelling, and value experience above others.

    In other words, millennials are breaking away from the conventional mode of spending and saving, developing a pattern of higher risk-taking due to their need for instant gratification. But there is still hope!

    Despite the common misconception, investing isn’t just for the financially established – you can start investing for as little as RM50 per month and begin your journey to building wealth. To brave the high seas of investing, it is important to remember the key is not just randomly betting on different investments but learning to save and making informed decisions for your future.

    Smart Investor reaches out to several experts in the field for their perspective on the topic.

    SURAYA ZAINUDIN, FOUNDER, RINGGIT OH RINGGIT

    Based on my interactions with the Ringgit Oh Ringgit audience who are primarily within the millennial age group, many of them invest their money in a combination of unit trusts and mutual funds.

    Amanah Saham Bumiputera (ASB) and Private Retirement Schemes (PRS) are popular, with many taking advantage of the PRS Youth Scheme a few years back, and collecting the RM500/RM1,000 bonus upon RM1,000 deposit.

    Other popular investment options are stocks (especially dividend stocks), fintech platforms like Wahed Invest, Stashaway and MyTheo (robo-advisory platforms), gold (HelloGold), P2P lending (Funding Societies) and crypto assets (Luno).

    In terms of the recommended proportion of their income to be put aside for savings and investments, I recommend anyone to save at least three to six months of living expenses as soon as possible, regardless of income level. You need the savings to protect yourself against any of life’s unexpected expense.

    After you hit that amount, feel free to choose either to save as much income from salary, add more income (increase salary or do a side hustle), or both. Taking willpower out of the equation by automating investments is a great way to get rich slowly.

    The stock market, generally speaking, intimidates any beginner, millennials included. However, it is great that there are personal finance content creators nowadays that share their stocks portfolios online using relatable language. It makes the whole process – from research to reallocation – easier to visualise and thus implement.

    Getting help from a financial adviser, a robo-adviser or opting for a do-it-yourself (DIY) approach or investing in mutual funds or exchange-traded funds (ETFs) – these are great ways to get started. Personally, I’m an advocate for the DIY approach since it’s the most cost-efficient approach.

    Investment information and advice is very easy to get for free online, via a quick Google search. I would personally save for the services of a financial adviser for estate planning instead.

    STEPHEN YONG, CHIEF KNOWLEDGE OFFICER, WEALTH VANTAGE ADVISORY

    The concept of ‘pay yourself first’, which is to set aside funds every time you receive an active income, is advocated by many financial advisers.

    The whole idea behind paying yourself first is to consider as if you were an employee of Me Sdn Bhd, and ensure that you get paid every month. That being said, the moment you receive your pay, set aside an amount into another account that you will not touch.

    Once you have accumulated three to six months’ worth of emergency funds, paying yourself first should be channelled towards investing. This is especially important for young adults to allow for early investing and compounding to build serious wealth. Here are a few practical steps to pay yourself first:

    • Decide how much you will pay yourself. It can be a percentage (20% of your pay, for example), or a fixed figure (RM1,000 monthly);
    • Set up an automatic transfer every month into a separate account designated for investing; and,
    • Set objectives for the money in your account to be allocated into various investments.

    You can also automate some investments if there is a regular savings plan option to gain the benefits of dollar cost averaging.

    For those who have just started out in their career, there are an increasing variety of investment vehicles available. Rather than start investing based on recommendations from friends and family (which is something young investors are prone to do), a smarter approach to selecting your investments is to have a customised personal investment plan following your desired asset allocation.

    One of the most important determinants comes from deciding on asset allocation which determines ~90% of volatility and gives ~40% of returns (Determinants of Portfolio Performance by BHB published in the Financial Analysts Journal).

    What is asset allocation?

    Asset allocation is to set how much of one’s investments goes into various asset categories to get the best balance between returns and reduced overall portfolio volatility. Here are some smart investment options for each asset class:

    For risk appetite, investor risk profiles are generally categorised into the following from the highest to lowest risk:

    Examples of high-risk investments include shares, commodities, cryptocurrency and alternate investments. Examples of low-risk investments include bonds and money market funds.

    In terms of how much risk millennials should be willing to take to build their investment portfolio, it is important to note that every millennial investor needs to decide for themselves how much risk is suitable.

    As a millennial, time and compounding are on your side, so you may be able to take on more risk than someone who is retired or near-retirement. There are various investor risk profile assessments available which help you to know your investment risk appetite.

    Overall, one can reduce risk by practicing diversification and having a personal investment plan. Diversification can be done by diversifying across the following:

    On the question of whether millennials are generally apprehensive about investing in the stock market, I would say millennials today have access to a wealth of information and resources.

    As such, everyone has their own preferences with some feeling comfortable investing directly in the stock market while some prefer using other investment vehicles. The key thing for millennials is to get trustworthy professional advice on how to invest.

    Overall, we are seeing a blended approach working out well with a combination of working with a financial planner, robo adviser, and maybe handling some areas using a DIY approach.

    MARSHALL WONG, FOUNDER, planNERD

    The ‘pay yourself first’ concept is a good practice, and as a financial planner myself, even I have created an automated system to make sure that I am getting paid first. The keyword here is ‘automated’.

    To do this, I have two bank accounts. The first is what I call the ‘Holding Account’, which is the main account which I use to receive my income. In this particular account, I set a recurring transfer of funds to another account, which I call the ‘Parking Account’, which is set up for the sole purpose of accumulating money for my next investment.

    When it comes to smart investment options that a young person can consider, as cheesy as it may sound, I believe that investing in one’s own knowledge is always the first thing a young person should do. Without proper knowledge, the line between investing and gambling can blur.

    Take cryptocurrency as an example. Most people that do not understand blockchain beyond it being ‘just a system behind Bitcoin’ may think that cryptocurrency is a gamble. But for those that truly understand the potential and the value that blockchain can bring to us in the future, cryptocurrency is seen as an investment.

    Don’t get me wrong, I am not saying that everyone should jump into cryptocurrency. A young person should start reading articles on business and finance to be equipped with the necessary knowledge to understand the true value of where they put their money into.

    On the topic of mobile-friendly investment platforms, I have personally invested with StashAway, Wahed and MyTheo. These platforms are great for beginners as they are simple, seamless and do not require investors to do as much homework before they invest.

    However, it is important to be reminded that we should diversify and not put all our eggs in the same basket.

    Recently, we have seen a US$7.6 bil online brokerage firm, Robinhood experienced a massive outage due to technical problems. Nevertheless, I encourage young investors to use platforms like these but remember to consider other traditional investments.

    Are millennials apprehensive towards investing in the stock market? I personally don’t think so.  Whether they ought to get help from a financial adviser, a robo adviser or opt for a DIY approach, I think millennials should start by doing their own research and try out the DIY approach.

    That being said, if they do not have the time or confidence, or they have tried the DIY approach with unsatisfactory results, they should consult a fee-based financial planner. A fee-based financial planner will identify and quantify their life objectives and assist them in choosing the correct investment.

    Investing in mutual funds, index funds or ETFs on a piece-meal basis without knowing the bigger picture is dangerous as each investment has different levels of volatility and time horizons.

    Risk-wise, there is no hard and fast rule, but then again, it all depends on the investors’ investment objective. If the objective is a short-term one, you should not take too much risks. But if the objective is a long-term one, millennials should consider taking on more risk and pay less attention to the short-term fluctuations.

    All in all, as a financial planner, I encourage young investors to have multiple investment portfolios to achieve different investment objectives. As such, investors can have both portfolios with high and low risk simultaneously.

  • Growth of the Malaysian Gig Economy Among Gen-Zers

    Growth of the Malaysian Gig Economy Among Gen-Zers

    Social media has been the main source in forming a new culture among the younger generation, creating a new norm that challenges Gen Z to come out of their comfort zone. With technology constantly progressing and simplifying the way we execute our tasks, the gig economy is now high in demand, especially during a time like COVID-19.

    While many among us are afraid of salary cuts and retrenchments, Malaysians are leveraging the resourcefulness and popularity of freelancing to make ends meet.

    Glenn Tay

    According to Glenn Tay, CEO and Founder of Gigworks, the freelancing landscape will not be diminishing anytime soon but will in fact continue to grow at a rapid pace as majority of the workforce are currently conquered by millennials and their priorities are more focused on work-life balance.

    “Malaysian youths, similar to those around the world, are always craving for that opportunity to do the things that they are passionate about, be it traveling, exploring, experiencing etc. and while doing so, they want to have the flexibility to earn sufficient income from wherever they are residing at that time.

    “We cannot deny that this is a new way of working now where jobs are no longer restricted by geographical boundaries. The idea of being fully employed by one firm is not desirable for those looking to have ‘freedom’ in their work management,” said Tay.

    With jobs experiencing drastic change and with the labour force shrinking, competition for talent is getting increasingly intense. Organisations need to think out-of-the-box to attract the talent market such as redesigning the job scopes in a way that can both draw in and connect with the Gen Z and, at the same time guarantee that these jobs continue to create a path for future talents.

    The Gen Z in Comparison to X and Y

    A study by the Zurich Insurance Group (Zurich) and the Smith School of Enterprise and the Environment at the University of Oxford on agile workforce has found that 38% of the respondents in Malaysia who are currently in full-time employment, are looking to enter the gig economy in the next 12 months. This percentage is significantly higher than the global average of 20% recorded in the study.

    While individuals involved in the gig economy come from a diverse range of backgrounds, identifying the main target is essential for the gig economy to develop in years to come. An ever-increasing number of individuals from Generation Z appear to shun ordinary 9-to-5 jobs. Instead, they would prefer working for themselves by freelancing their way in order to obtain their dream jobs.

    The impact of their entry into the working environment will be quick and significant. However, Gen Z has an entirely different point of view compared to the rest when it comes to careers and how to define success.

    Gen Z More Inclined towards Autonomy 

    One of the factors contributing to more people opting for freelance work over permanent 9-to-5 professions is self-directed motivation. It is much simpler to be driven when you are in control of the flow of your work.

    It gives Gen Z a sense of autonomy which they desire for themselves – generating a sense of individuality, determination and providing the ability to achieve what they have been dreaming of. Having control over how they work and the type of job to work on is something that appeals to this young crowd.

    The appeal in this type of working lifestyle is that it also allows for work to be centred around creative passions based on portfolios and skills, as opposed to a full-time job that provides steady income but is more monotonous and rigid in structure.

    For example, university students juggling between college and work-life can find it challenging, therefore they are looking for easier alternatives to fund their tuition fees. Joining the gig economy as a freelancer allows them to have this much-desired flexibility. Although they may not always be able to earn as much as a full-timer, the option of being able to pay off their debts bit by bit while still having the capacity to manage their work-life-balance is satisfactory enough for these undergrads.

    Desire for Flexibility

    According to Workforce Institute, 55% of Gen Z-ers are attracted to the ability to work on their terms in gig employments as the flexibility allows you to go at your own pace and avoid breakdowns. Approximately 26% of Gen Z-ers would work harder and remain longer at an organisation that supports flexible working hours.

    Millennials and Gen Z currently account for slightly over a third of the global workforce. In the next decade, that figure is set to shoot up to 58%, making the youthful generations the most dominant drivers of the workforce.

    To meet the demands of this up-and-coming generation, we, as a society, have to respond to these differences in a mutually beneficial way that would increase trust and generate positive societal impact.

    Thus, it is important that a proper transition and greater overall acceptance of freelance careers is in place to welcome this new way of work.

    Digital Natives 

    Being moulded by technology, Gen Z was exposed to the Internet at a young age, making them the youngest influencers to appear on the scene. They are generally more tech-savvy than the older generations as they have never known a world without smartphones and the Internet.

    Non-traditional ways of working appeal to this group as they are more familiar and accustomed to a technology-driven society.

    We see a rising consensus that digital readiness is no longer optional, but mandatory. When MCO was enforced, the few months of this nation-wide exercise have shown that Malaysians have become more comfortable with utilising technology to collaborate and deliver work on time, replacing the need for physical travel.

    However, this period also brought to light certain difficulties and challenges encountered when working from home such as network issues, communication barriers, and lack of technology readiness.

    Nonetheless, Malaysia is well equipped and ready to adapt to this new normal, with Tun Dr. Mahathir Mohamad looking to implement the gig economy as part of the upcoming 12th Malaysia Plan, and most organisations already alerted and prepared following the MCO period.

    It is only a matter of time before we start to enjoy improved network connectivity and speed, better IT infrastructure, and clear work procedure and discipline to be implemented for the majority of Malaysian freelancers.

    Is Gig Work Appealing Enough?

    Numerous permanent jobs today do not provide a similar degree of job security compared to the past as employers often look at optimising cost efficiencies. Organisations often choose to reduce operation size as a way to find more resources to invest in other parts of the business.

    Instead of simply keeping full-time employees, a coordinated workforce permits organisations to better manage expenses and investments to coordinate business and market demands. Gen Z wants both stability and flexibility at the same time to stay in business.

    Due to this sentiment and in realising the limited options for individuals to find valid yet justifiable freelance work, Gigworks, a mobile application providing online professional service engagement is opening doors for all groups including the younger generation to ensure their talents are being recognised by businesses while catering to the needs of Gen Z.

    “We want to introduce a culture that builds the interest of Gen Z to have a work-balance and offer stability to foster them financially especially during a time like this. Encouraging them to pursue their passion will only make them more confident, allowing them to venture into new projects,” said Tay.

    In a nutshell, now that technology finally exists and caters to these demands, this will be something everyone can benefit from in the gig industry.

    This article is contributed by Gigworks, a mobile application inspired by the impact and advancement of technology in people’s lives. For more information on the company and its services, visit www.gigworks.co/sg.

  • Precious Metals Bull Market in Full Swing

    Precious Metals Bull Market in Full Swing

    After nine long years, the precious metals market is once again a bull market: gold has finally swept past its previous high of US$1,920 per ounce set in 2011 and is primed to push past US$2,000 in the coming months.

    In tandem with gold’s rise, silver – often seen to be the poor man’s gold – has also surged past seven-year highs in recent days and is positioning to make a run for its all-time high of near US$50 per ounce.

    Spot gold traded as high as US$1,945.72 on Monday before closing at US$1,942.24, topping the previous record (in US dollar terms) by more than US$20. Meanwhile, spot silver jumped as much as 8.1% to US$24.60 an ounce, the highest since 2013.

    After topping out in 2011 in the aftermath of the global financial crisis, gold and silver had fallen into an prolonged bear market lasting for years.

    However, the breakout of gold and silver prices is confirmation that the long-awaited bull market for the precious metals is in full swing, and this is garnering the attention of previously disinterested investors and business media.

    With the Covid-19 pandemic wreaking havoc on economies and equity markets around the world, the lure of gold as a safe haven asset has risen significantly.

    Analysts also attributed gold’s rapid rise to the weakening US dollar, low-to-negative interest rates, a flood of money printing by central banks in response to the pandemic, rising inflationary pressures, possible global stagflation and uncertain market conditions.

    Forecasts for further gains have been building even before gold’s breakthrough this week. Bank of America Corp has stuck with its April forecast for US$3,000 for gold over the next 18 months.

    UBS Group AG sees prices reaching US$2,000 by end-September, its global chief investment officer Mark Haefele said in a note on Monday. The group has added the metal to its “most preferred asset list”, according to a Bloomberg report.

    “You simply couldn’t pick a more perfect storm of events which would allow for gold to perform,” said Steve Dunn, head of ETFs at Aberdeen Standard Investments.

    “With low-interest rate policies, negative real rates, super accommodative monetary policy, huge amounts of global fiscal spending, a weaker US dollar, escalating US-China tensions and no clear end in sight for the coronavirus pandemic, all parts of the equation are coming together,” said Dunn in the report.

    Pullbacks Present Buying Opportunities

    As a note of caution, investors need to be aware that the surge in gold prices also increases the risk of profit-taking and a sharp downside correction.

    However, for those are inadequately invested into gold and silver bullion, exchange-traded funds (ETFs) or mining stocks, any pullback in the precious metals offers the opportunity to buy on the dip before prices rebound to newer highs.

    While gold has hogged the limelight recently, the smart money is investing in silver as it is still some 50% from its all-time high, with the potential for the monetary and industrial metal’s price to reach triple digits, according to some bullish analysts.

    They point out that in previous bull markets, gold will move first while silver lags behind. But once silver gets going, it will shoot past gold and outperform it by a country mile. Since it hit a low of US$11.64 per ounce in March, the spot price of silver has rebounded by more than 100%.

    Gold Fund for Local Sophisticated Investors

    Interestingly, in the midst of a global pandemic and a global economic slowdown, Maybank Asset Management Sdn Bhd (MAM Malaysia) launched a gold fund early last month.

    The fund is targeted at sophisticated investors with a long-term investment horizon, offering them the opportunity to invest indirectly in physical gold.

    The MAMG Gold Fund is a wholesale feeder fund which aims to maximise investment returns by investing in the Pictet CH Precious Metals Fund – Physical Gold (target fund), a Switzerland-domiciled fund of Pictet Asset Management SA.

    “Increasingly we see demand for gold as it is a good hedge against market uncertainties,” MAM Malaysia chief executive officer Ahmad Najib Nazlan said.

    He noted that safe haven investment demand created by the pandemic conditions as well as low-interest rates and rising money supply is still conducive to gold purchase.

    “Geopolitical issues, a (US) weaker dollar, renewed trade tensions and the upcoming US presidential election may support the demand for it too,” he added.

    “Our MAMG Gold Fund will be able to offer investors diversification in their investment portfolios. In these uncertain times, it is important to understand and provide investors with more options and strategies to suit their evolving investment needs,” he added.

    Building Portfolio Resilience with Gold

    Wei Li

    The need for the precious metal in one’s investment portfolio is also echoed by BlackRock, the world’s biggest asset management firm, which advocates having gold as a source of “portfolio resilience”.  Wei Li, iShares EMEA head of investment strategy at BlackRock, said gold is an attractive asset as uncertainty and volatility remain dominant themes for investors.

    Gold will be an attractive diversifier as it has “a low correlation to equities”, says Li.

    “In a climate of uncertainty, portfolio resilience is more important than ever: the ultimate shape and timeline of the post-pandemic economic recovery remains uncertain, the trajectory for company earnings is murky, and macro data shows signs of further deterioration.

    “This leaves ample room for volatility and sharpens focus on building resilience through a higher allocation to gold. The short-term outlook for gold shines due to its role as a portfolio diversifier.”

    Li added that over the longer term, gold may benefit from strategic tailwinds from pressure on bond yields through large central bank quantitative easing programmes and a lower-for-longer rate environment.

    “For investors looking to diversify within equities, gold producers may also be well positioned to benefit,” she said.

    A majority of gold and silver mining companies are listed on stock exchanges in Canada, the US and Australia. With the rapid rise in gold and silver prices this year, many mining stocks have seen their share prices rise 100% and more since the global equity market crash in March.

    By Lee Min Keong

  • Encouraging Property Trends Among M’sians Despite COVID-19

    Encouraging Property Trends Among M’sians Despite COVID-19

    iProperty.com.my has revealed encouraging property-seeking trends among Malaysians despite pandemic.

    iProperty.com.my has recently announced the results of its latest consumer survey. The survey aims to understand Malaysians in their property seeking journey during the Movement Control Order (MCO) period and how it has affected them.

    The survey also analyses the purchasing desire of homebuyers before, during and after MCO. The survey was conducted between 11 May – 1 June 2020.

    44% of survey respondents were looking to purchase a property before the announcement of MCO

    The property portal reveals that 44% of the survey respondents are looking to purchase a property before the announcement of the Movement Control Order (MCO).

    Out of these property seekers, 28% stopped actively looking after the MCO was announced on 16 March 2020. However, more than one third of the property seekers who stopped actively searching (38%) stated that they are either waiting for prices to drop or are still open to good property deals.

    The top two factors which influence a property seeker when evaluating an online listing is validation of a property’s valuation (pricing trends for similar properties) and listing content which gives a very clear understanding of the property’s space and layout.

    Property seeking interest unaffected by MCO

    According to the survey results, in spite of the unprecedented situation caused by COVID-19, property seeking trends among Malaysians remained encouraging.

    Interestingly, the survey results reveal that 24% of the respondents who were not looking to buy a property before the MCO are now looking to purchase after the MCO announcement.

    A majority of these new entrants are either looking at current market conditions as an opportunity to purchase their first homes, to upgrade their existing homes or to invest in property, while the minority mentioned that they are downsizing or moving to more convenient locations.

    With these new entrants the percentage of respondents who are actively looking for a property increased to 45% post MCO announcement. On top of this, another 10% of respondents, who are not actively looking for a property post MCO, are open to the right property deals.

    Taking into account this group, the percentage of respondents who are interested to purchase a property after the MCO announcement tops 55%.

    Nevertheless, 92% of the people who are actively seeking for a property state that they have a lower readiness to transact (49% are waiting for prices to drop while 43% are still looking but more cautious about making any financial commitments).

    90% of property seeking respondents named easy entry options as the top factor

    The survey further reveals that 90% respondents answered that the factors which will help ease their transaction decisions are easy entry options such as zero down payment, developer discounts and subsidised legal costs.

    In addition to easy entry points, the survey also reveals that 81% of respondents are looking for trustworthy and reliable developers/ agents.

    Also, 89% of property seekers are receptive to the idea of virtual viewings. 75% state that it will help them decide whether or not to view a property in person while the remaining 14% says it is enough for them to decide whether to buy/rent a property.

    On the same note, 83% of all respondents want to get updates on good property deals (new properties on promotion, or sub sale properties at good prices), while 54% of respondents are interested in market insights and data, to help them better understand the current state of the property market.

    This positive consumer survey highlights the timeliness of the re-introduction of the Home Ownership Campaign (HOC) under the government’s recent Economic Recovery Plan (PENJANA) package.

    The HOC initiative which features significant stamp duty holidays would help alleviate the financial burden of aspiring home buyers.

    Commenting on the consumer survey, iProperty.com.my General Manager of Marketing and Communications Wong Siew Lai said, “The findings from this consumer survey revealed something very encouraging on Malaysian property seekers purchasing desires despite the unprecedented situation caused by the COVID-19 pandemic.

    “Overall, volume of demand did not change significantly and people are still looking for properties. Property seekers are spending more time researching and evaluating their property options online.

    “The market may be much more receptive to property deals and solutions that help them discover those deals, as well as online content that helps them better understand the current market conditions.

    “If they discover the right deal, many opportunistic property seekers are willing to invest even beyond their original budgets.”

  • Investing Quandary for Gig Economy Millennials

    Investing Quandary for Gig Economy Millennials

    In Malaysia, the rising number of gig workers face various challenges to investing for their future.

    The rapid advancement of technology over the past decade have more than changed the way people live, work and spend their money. The employment landscape, too, has undergone an evolution, with hyper-connectivity and social media paving the way for the rise of the ‘gig economy’.

    The gig economy is a labour market characterised by the prevalence of short-term contracts or freelance work done by individuals. Driven by the digital environment and popularity of apps that instantly communicate information and opportunities for work, the gig economy sees companies engaging contract workers for a temporary period rather than hiring them for permanent positions.

    Simply put, the gig economy is a free market system in which companies – from small businesses to larger organisations – collaborate with independent contractors, project-based workers, part-time employees and freelancers.

    This segment of the economy is gaining popularity among the younger generation, especially millennials and Gen Z, simply for the fact that it provides them with dynamic flexibility towards their time management and encourages specialisation to provide specific services in accordance to their interests or talents.

    The gig economy has experienced a growth trend in recent years whereby about 25.3% of the Malaysian workforce in 2018 comprised freelancers, according to World Bank data.

    “This number is growing, thanks to the rapidly available platforms which act as intermediaries between independent workers and consumers,” Wealth Vantage Advisory certified Islamic financial planner Nuraishah Hanani Abdul Ghani.

    Nuraishah Hanani

    Not just about flexibility and freedom

    While being a gig employee offers great flexibility and freedom in terms of working hours and the people that you work with, the downside is that gig employment does not promise a fixed salary, says Blueprint Planning licensed financial adviser Gunaseelan Kannan.

    The other important implication is that the high instability of income will have a direct impact on their investment engagements, he adds.

    “Gig employees should understand the investment risks, investment time horizon, and the terms and conditions on the withdrawal of investments. In general, high liquid investments should be adaptive to an individual who is active in the gig economy,” he explains.

    According to Gunaseelan, the fact that gig employment does not provide Employees Provident Fund (EPF) contributions will also have severe implications on one’s retirement funds.

    Gunaseelan Kannan

    “Taking the initiative to make personal contributions to EPF is a good idea for gig workers as EPF currently allows investments of up to RM60,000 annually for this group of individuals.”

    Moreover, gig workers are also at the mercy of market risks and fluctuating economic conditions, licensed financial adviser Gor Sheau Shuenn chimes in.

    Gor further points out that the irregularity of income presents gig workers with a limited opportunity for investments as they are more likely to put their income aside for when they are in between projects.

    “In addition to EPF, the lack of Socso contributions and possibly, retirement savings and medical insurance as well may leave gig employees in a tight spot during rainy days or when they retire,” he adds.

    A right mindset is needed

    As to how gig workers can overcome these problems, Gor reveals that having a personal cashflow budget is important. “You should be clear how much money you need to put aside for investment, how much money you can spend, and what you spend your money on each month.

    “Next is an investment objective: will you be investing your money for retirement, for a property down payment, or for a college fund for your children?

    “Knowing how much money is needed in the long term and breaking it down to monthly, quarterly or yearly saving targets is a good practice. Once your priorities are clear, you can then work towards that goal,” he advises.

    Gor Sheau Shuenn

    Wealth Vantage Advisory’s Nuraishah concurs. “Because gig workers do not receive a regular salary, millennials who are engaging in the gig economy might face problems with their instalments which can affect their credit rating if the matter goes unattended in the long run,” she adds.

    Therefore, a detailed approach with the right mindset must be adopted to prevent the issue from ballooning up, which may eventually disrupt one’s financial stability.

    “The very first step to achieve this is by determining and strategically splitting your finances into different categories, namely basic needs, expenses, forced savings and investment allocations.

    “That way, you will always have extra money to carry forward into the next month in the event of low gig demands,” explains Nuraishah.

    Diversify your income

    With the immense freedom and flexibility of the gig economy comes the great responsibility of taking charge of your own financial future. And no doubt investment is probably a stressful topic for anyone involved in this segment of the economy.

    Nuraishah says a good first step is to start building an emergency saving fund immediately.

    “As a gig worker, millennials are more susceptible to financial hardship as compared to those who have to miss work due to an emergency.

    “In contrast to salaried workers, they do not have health coverage or other forms of protection at work, and it is critical they have enough money saved up in case of an emergency, in addition to having excellent coverage of term life and health insurance,” she explains.

    While it might seem like an obvious suggestion, Nuraishah suggests one of the keys to achieving financial success in the gig economy is for millennials to think like a business person and plan accordingly – and this means getting into the habit of keeping themselves accountable for their expenses.

    “Diversifying their income, meanwhile, may come naturally as they delve further into the gig economy, and for freelancers, this move becomes essential to achieving financial success.

    “As the nature of work in the gig economy is temporary, diversifying your income as much as possible is important to keep their financial and business plan on track.”

    Despite the lack of a fixed salary, Nuraishah believes it is not impossible for gig workers to have the upper hand in terms of investment.

    “In comparison to the regular working concept, millennials who have opted to join the gig economy are not restricted to the 9-6 routine which is rigid and repetitive with little to no opportunity of generating additional cashflow beyond what had already been agreed upon.

    “Thanks to the dynamic concept practised in the gig economy, gig workers are their own managers, and they alone can decide where their money ought to go to. For this matter, it is very crucial that they have a clear financial goal, which needs to be practical and yet, feasible to achieve.

  • Analysis: A Bright Spot for ASEAN Economies

    Analysis: A Bright Spot for ASEAN Economies

    Global trade volumes topped out in 2018 amid slowing global growth and ongoing trade tensions between the US and China. In 2020, the global pandemic has been another headwind for global trade. What about ASEAN economies?

    Nomura’s leading index of Asian exports, which aggregates the region’s exports (excluding Japan) of eight forward-looking components, and typically has a three-month lead, is signalling that aggregate export growth in the region could shrink between 10% to 20% (relative to last year) in the coming months.

    Further downside risk to global trade comes from the worsening relationship between the US and China and the potential for a reescalation in trade tensions. Understandably, this backdrop makes for a difficult environment for Southeast Asian economies – specifically, members of the Association of Southeast Asian Nations (ASEAN), a group of highly trade-dependent economies.

    That said, how the region weathered challenges in the past two years has given us some confidence in its ability to navigate the current environment.

    The News isn’t All Bad

    The Asean region has been a big beneficiary of ongoing trade tensions, the global pandemic, and China’s relatively early emergence from the Covid-19 outbreak.

    The region’s share of global trade has gone from strength to strength since 2000, with trade in electronics and integrated circuits being a major driver.

    When the US-China trade war started to escalate in early 2018, there were fears that slower global trade growth would negatively impact the trade-dependent region.

    But as events unfolded, it became clear that China looked increasingly to Asean to offset the impact of the trade war – and later, the Covid-19 outbreak – to counter the rise of increasingly stringent US trade policies.

    Asean’s share of Chinese trade (exports plus imports) overtook that of the US’ in early 2019. But it didn’t stop there – in early 2020, Asean overtook the European Union as China’s largest trading partner and its share of trade with China remains near a record high of around 15%.

    The ASEAN region has attracted many global companies that are looking to diversify their production in the wake of the US-China trade war, and the Covid-19 outbreak has accelerated that trend.

    The development is understandable – Asean sports many competitive advantages, among them, its member countries’ relatively high rankings in the World Bank’s Ease of Doing Business Index.

    The Asean-6 (namely, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam) all sit within the top half of global rankings across 10 areas of doing business – starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

    Other advantages that the region has over its competitors are: relatively lower-wage structures, better productivity, and geographic proximity to China. The fact that the region has a complementary industrial structure to China is also important.

    As China emerges from Covid-19, the gradual recovery in consumer demand in the country is being met by ASEAN. Vietnam, Malaysia, and Thailand have enjoyed particularly strong growth in demand for their goods from China.

    In our view, sectors that are likely to benefit as the Chinese economy kicks into gear include mining (benefiting major producers from Indonesia and Malaysia), semiconductor and electronics (benefiting Thailand, Malaysia, and Vietnam), and textiles and garment industries (benefiting Vietnam and Thailand).

    Important Mitigants in a Challenging Environment

    An acceleration in Asean integration in the coming years is likely to make the region even more competitive and resilient to global shocks.

    This could be achieved by reducing tariffs, improving market access, and increasing the region’s absorptive capacity further.

    The Regional Comprehensive Economic Partnership, a proposed regional free trade agreement that’s currently being negotiated, could go a long way to expand regional connectivity in trade and investment. Proponents of the agreement hope that negotiations can be concluded by the end of the year.

    On balance, even though the leading indicator for Asian export growth is warning of a major slump ahead and geopolitical risks remain elevated, there remain many positive dynamics at play that can serve as mitigants in a challenging environment.

    By Sue Trinh

    Sue Trinh is a senior macro strategist at Manulife Investment Management, a leading global asset manager, with investment expertise extending across a broad range of public and private asset classes, as well as asset allocation solutions.

  • P2P Financing an Ideal Investment Portfolio Amidst COVID-19

    P2P Financing an Ideal Investment Portfolio Amidst COVID-19

    The COVID-19 pandemic has created massive uncertainty in the investment market, and this is not an isolated case. All over the world, foreign investors are navigating uncharted waters as stock markets are becoming increasingly difficult to predict in the current economic climate.

    Malaysia’s FBM KLCI closed at 1,490.14 in end May, its highest level since March this year, although this may not necessarily signify the end of the ongoing crisis.

    The record high number of traded shares indicated active participation rate from retail investors in Malaysia, partly attributed to the country being home to the world’s largest glove makers of which demand for protective equipment has surged during the pandemic.

    Nevertheless, investors should ensure that they continue to diversify their investment portfolio especially during these times.

    Many experts believe it to be a protracted recovery from the COVID-19 pandemic. Therefore, investors should remain cautious of the recovering stock markets and hence, should be planning their investment decisions wisely, particularly amid economic uncertainty.

    At the end of the day, the fact that a vaccine has yet to be found very much points toward concerns surrounding the potential threat of the virus and its subsequent economic implications in the long run.

    Mitigating Risk through Diversification into P2P Financing Investment

    While the effect of COVID-19 remains uncertain and continued volatility can be expected, it is wise for investors to employ strategies to enhance returns, whether the market shifts violently up or down.

    Diversification helps reduce overall portfolio risk by allocating investments into different asset classes and hence reduces the risk of a single investment or asset class significantly impacting the performance of the overall portfolio, leading to more stable returns over time.

    Wong Kah Meng, Co-founder and Chief Executive Officer of Funding Societies Malaysia, the first and largest peer-to-peer (P2P) financing platform in Malaysia, commented, “It is ever more critical for investors to ensure that their investment portfolio is well diversified amid the current market uncertainty.

    “Whilst there could be opportunities for investors to make tactical investment decisions given the volatility in capital markets, investors should also be aware of the increased correlation across traditional asset classes and hence the greater need for diversification beyond traditional asset classes such as stocks and bonds. As such, P2P investment could play a key role in the diversification strategy for investors.”

    Added Wong, “Aside from diversifying their investment portfolio, we encourage risk averse investors to focus their P2P investment strategy on shorter tenure investment notes or collateralised investment notes which are more secure whilst still providing decent returns.

    “Overall, we believe that P2P financing serves as an attractive investment option which caters to the needs of a wide variety of investor risk – return profiles.”

    Investing with Funding Societies

    Funding Societies provides a seamless and user-friendly investment process supported by best-in-class customer experience. Investors can easily invest in local SMEs and earn attractive risk-adjusted returns compared with other forms of traditional investment options, with interest returns of up to 14% per annum (p.a.) after fees with minimum investment amount from as low as RM100.

    The platform has also recently taken a multi-pronged approach to further tighten its risk assessment processes, which includes assessing the impact of COVID-19 and MCO on their SME clients, reviewing existing SMEs’ exposures, and implementing action plans for impacted SMEs.

    These stepped-up efforts ensure their clients’ investments remain protected while simultaneously continuing to lend a helping hand to support the under-served SMEs who are affected by the outbreak.

    For more information on how to start investing with Funding Societies, visit www.fundingsocieties.com.my.

  • Bursa Malaysia Derivatives Hits New Highs

    Bursa Malaysia Derivatives Hits New Highs

    With five all-time trading highs in January 2020, Bursa Malaysia Derivatives Bhd (BMD) is on a roll. It subsequently bettered some of these highs in February and March as market conditions deteriorated with the spread of the Covid-19 pandemic.

    BMD’s derivative instruments essentially allow market participants to take advantage of both upward and downward trends in the market, and are particularly relevant in light of global economic uncertainties and heightened market volatility.

    The derivatives market offers products that serve as an efficient price discovery and hedging instrument, providing market participants an effective avenue to manage risks as well as take advantage of the market position.

    “The rising trend, especially in open interest for all products, is a positive development, indicating a rise in confidence and strong appeal of BMD’s products by market participants,” BMD chief executive officer Samuel Ho (pic, below) tells Smart Investor.

    BMD aims to continue on this growth trajectory, he adds, by broadening its product offerings for investors and traders to manage their price risk exposure. Here are snippets of our interview with Ho.

    Smart Investor: BMD achieved five all-time trading highs in January 2020. Have there been new highs since then? Tell us more about this historical milestone.

    Samuel Ho: In the first quarter of 2020, BMD saw strong levels of trading activity, hitting several historical highs. We ended March 2020 with three historical highs:

    (1) Trading volume for all products combined at 2.13 million contracts surpassing the previous record of 1.72 million contracts registered in February 2020;

    (2) Monthly trading volume for Crude Palm Oil Futures (FCPO) of 1.66 million contracts surpassed the previous high of 1.43 million contracts registered in February 2020; and

    (3) Monthly trading volume of FBM KLCI Futures (FKLI) of 455,535 contracts surpassing the previous high of 388,755 contracts registered in August 2015.

    Additionally, the total daily open interest of 346,403 contracts for all products traded on BMD hit a new high on 26 February 2020, surpassing the previous all-time high of 343,251 contracts registered on 29 January 2020.

    How has the derivatives market performed in light of the COVID-19 pandemic and arising economic uncertainties and market volatility?

    In the derivatives market, the FCPO and FKLI have served as an efficient price discovery and hedging instrument that have provided market participants with an effective avenue to manage their risks as well as the opportunity to express their trading views to take advantage of the market position.

    The depth of the market has provided orderly execution with no significant negative movement. This has been evident by the increase in volumes trade for both FCPO and FKLI futures contract.

    With the global economy slipping into recession and equity markets in bear market territory, how can BMD help market participants manage their risks and thrive in such uncertain environment?

    BMD’s derivative instruments allow market participants to take advantage of both upward and downward trends in the market. In a downward market, investors can take advantage by short-selling FKLI futures contract to protect their equity portfolio.

    For example, the short position will gain as the FBM KLCI declines. This gain will allow investors to offset the loss in the underlying cash equity market. There are also traders with a speculative objective who enter a short position with FKLI futures in anticipation of a market downtrend.

    However, speculation can be extremely risky as they are vulnerable to both the downside and upside of the market as it involves leverage risk. It is therefore essential that investors have a clear understanding of the risk and reward before entering into any speculative trades.

    What are some of the action plans BMD has put into place to ensure continued sustainability and vibrancy of the capital market?

    The first quarter of 2020 was marred by various unpredicted events that have contributed to higher volatility in global markets. This included the oil price war between Saudi Arabia and Russia, tensions between the US and Iran, and the unprecedented health crisis caused by the COVID-19 pandemic.

    During this period, BMD registered several new highs in trading volume and open interest for our derivatives products. We also recorded the highest quarterly Average Daily Contracts (ADC) ever.

    This is an indication of the continuing confidence of our customers in BMD’s product offerings to manage their price risk exposures.

    Earlier this year, the Exchange launched the world’s first Options on Refined, Bleached & Deodorised Palm Olein Futures Denominated in US dollar (OPOL) contract.

    To encourage further participation in OPOL, the Exchange has waived the exchange and clearing fees until 30 June 2020. The OPOL contract allows for the introduction of more sophisticated strategies to raise the level of derivatives trading and will attract new categories of market participants.

    We also re-launched the Single Stock Futures (SSF) contract offering an expanded list of new underlying stocks. This will provide investors with an additional risk management tool as well as an opportunity to gain exposure to the equity market. You can view the full list of SSF contracts on our website at www.bursamarketplace.com/ssf.

    Moving forward, we aim to continue this growth trajectory by diversifying our products and service offerings as well as strengthening our derivatives ecosystem to enhance market attractiveness and vibrancy.

    What are some major programmes or initiatives that BMD will be rolling out in 2020?

    For our commodity products, BMD is implementing the Malaysian Sustainable Palm Oil (MPSO) Certified Physical Delivery to fortify further our benchmark Crude Palm Oil Futures (FCPO) contract in line with the Malaysian Government’s Malaysian Sustainable Palm Oil (MSPO) mandate.

    The national scheme is for all oil palm plantations, independent and organised smallholdings, and palm oil processing facilities to be certified per the requirements of the MSPO standards.

    We also plan to introduce the Alternative Delivery Procedure (ADP) for FCPO contract. This new facility allows flexibilities for buyers and sellers to negotiate their delivery terms other than one specified by the Exchange.

    We are also re-launching the Crude Palm Kernel Oil Futures (FPKO) contract to cater to the industry need for a palm kernel oil hedging instrument.

    For financial derivatives, we are currently working with Bank Negara Malaysia (BNM) and Securities Commission Malaysia (SC) to revitalise the 5-Year Malaysian Government Securities Futures (FMG5) contract by changing the settlement methodology from cash to physical delivery.

    The first physically delivered contract will be the Dec 2020 FMG5. This initiative is in line with BNM’s efforts to improve market efficiency, accessibility, and liquidity in the domestic financial market.

    Participation by foreign institutions has been growing from strength-to-strength, contributing close to 46% of our ADC. We will continue to build on this by promoting our derivatives products to foreign proprietary trading firms, hedge funds and commercial firms.

    We will also introduce foreign futures brokers to Malaysian futures brokers in our bid to forge new interbroker relationships for potential business opportunities in the future.

    As part of our market entry strategy into Greater China, our initiatives include offering market data fee waivers to new Futures Commission Merchants (FCM) from Greater China who promote BMD products to their clients.

    We have also recently embarked on a partnership with a leading financial media publication, China Futures Daily, as one of the foreign exchanges featured in their annual live trading competition.

    This partnership will help increase the visibility of our products in the region. For domestic institutional participants, BMD plans to work with palm oil industry associations to conduct targeted product awareness and risk management seminars or webinars to encourage local institutions to use futures and options as part of their risk management tool.

    We will continue to conduct a series of webinars to educate retail participants on derivatives trading. In our pipeline, we are developing a mentor-mentee programme, a collaboration with futures brokers and professional traders to help grow the professional trading community.

    However, because of the COVID-19 pandemic, our efforts to educate and promote will be carried out digitally. Finally, we are also looking out for opportunities to collaborate and forge strategic partnerships with other foreign exchanges.

    This is part of our continuous efforts to consolidate and lay the building blocks for our next stage of growth.

    BMD is one of the exchange partners in the global trading competition held by China Futures Daily. What benefits are expected from this competition?

    This live trading competition is one of China Futures Daily’s annual highlights. Last year, the competition attracted over 45,000 participants.

    This year, the competition is held from 27 March to 25 September 2020. It is open to all traders both from mainland China and other countries outside of mainland China.

    For the first time, BMD is participating as a Silver Sponsor and one of the Exchange Partners, with the FCPO as our participating product. We are offering two award categories based on the highest return rate and highest trading volume.

    Each category will feature three winners. The Champion for each category will take home a cash prize of RMB10,000 along with a trophy and a certificate! The collaboration with China Futures Daily aims to help increase our brand and product visibility in the Greater China region.

    This is also in line with our internationalisation strategy. For more information on this competition, you can visit the official website at http://special.qhrb. com/200122-1/ or email us at futures@bursamalaysia.com.

    By Bernie Yeo

  • Analysis: The World after the Flood of Fiscal Stimulus

    Analysis: The World after the Flood of Fiscal Stimulus

    The global fiscal stimulus tap has been unleashed to fight the impact of the COVID-19 outbreak. We think the impact of this stimulus is binary and, if sustained, it could break the decade-long disinflationary cycle.

    In contrast, if austerity measures are subsequently imposed, the era of low rates and low inflation will likely continue for the foreseeable future.

    The combined scale of fiscal and monetary response has been massive – estimated to be around US$17 trillion at the time of writing. The quantum of stimulus provided this year is also significantly higher than the 2008 Global Financial Crisis (GFC).

    This is not surprising since monetary policy has far less wiggle room now. Moreover, the pandemic is not due to bad economic decisions; there will be little backlash on governments supporting affected sectors (e.g. airlines, banks, small retailers etc.).

    Although we saw countercyclical fiscal stimulus after the GFC, it was followed by significant austerity measures as governments were worried about the inflation implications of quantitative easing (QE). But inflation never returned.

    The past decade has demonstrated the effect of loose monetary policies: negative interest rates, flatter yield curves, low inflation, accumulation of corporate debt, and narrowing credit spreads, among others. But we have little experience of knowing the combined effects of expansionary fiscal and monetary policies on economies and markets.

    Fig 1: Global fiscal stimulus exceeds 2008

    A Powerful Twin Policy-mix

    A key difference between monetary and fiscal policy is that while monetary stimulus creates a large positive liquidity shock, it requires households and companies to be willing to take on debt and spend. On the other hand, fiscal spending adds directly to aggregate demand with no private sector debt build-up.

    Large unemployment benefits and “helicopter” money are windfall gains to consumers and leave no debt behind. If the stimulus is directed towards public capital expenditure which ultimately increases economic growth and creates jobs, it would eventually crowd-in private spending and the multiplier effects would fuel higher growth.

    Recent fiscal packages have focused on mitigating the initial impact of COVID-19. When the second-round of impact hits i.e. higher unemployment, corporate defaults and bankruptcies, more fiscal support will likely be announced.

    Of course, if these stimulus packages prove to be one-off and governments hit the pause button on the deficits or actively seek to reduce it, the medium-term implications will likely mirror the conditions post GFC.

    However, if countries see renewed waves of COVID-19 outbreaks, unemployment rates may stay elevated for a number of years. Against this backdrop, and with demographics not in favour for many developed and some emerging markets, countries that have limited binding constraints will probably continue to run large deficits.

    The Fiscal Divergence

    There will likely be divergences in the impact of fiscal stimulus on developed markets (DM) and emerging markets (EM). DM economies that have the benefit of low rates, low external debt, and low inflation can afford to keep monetary and fiscal policy easy, facilitating the cycle of higher demand, higher inflation and steeper curves.

    But not all DM economies are in the sweet spot, particularly within Europe where monetary and fiscal policy do not work in tandem; certain countries may only be able to announce stimulus with constraints.

    However, within EM economies, there are potentially two groups – one which does little fiscal stimulus to start with given their prudent approach, and one that continues with fiscal stimulus despite weak external balance sheets and therefore potentially face vulnerabilities in their foreign exchange and bond markets.

    Looking at the EMBI universe, CEEMEA (Central & Eastern Europe, Middle East and Africa) countries stand out as being the most vulnerable as they have higher short-term external debts and are expected to run large fiscal deficits this year.

    These economies indulging in fiscal extravagance may face sovereign rating downgrades, spike in bond yields, and steeper yield curves, and eventually be forced to undertake austerity measures. EM Asian economies appear as relatively stronger, with most having short-term external debts lower than 10% of GDP, with the exception of Malaysia.

    While rising fiscal deficits are bringing debt sustainability questions to the fore, it is important to highlight that debt issuances are a problem mainly when interest rates are higher than nominal GDP growth. If interest rates remain low (as they are now) and fiscal spending leads to higher growth, then debt/GDP ratios might fall or at least remain steady.

    Fig 2: EM Asia appears to be better placed

    Inflation or Disinflation?

    Sustained fiscal deficit, combined with synchronised monetary stimulus may eventually break the decade-long disinflationary trend. Adding to this tailwind to inflation is the potential negative supply side shock driven by the end of globalisation and the reversal of supply chain efficiencies.

    This scenario can be thought of as being akin to the post World War II period; after the negative demand shock and low inflation, the US economy saw a sharp rise in inflation led by stimulus, eventually forcing monetary policy to tighten substantially.

    The process may be more gradual this time; it will take a while for the current economic slack to narrow. Besides, structural changes such as more remote working and less demand for business travel and commercial real estate will likely dampen inflationary pressures.

    There are several market trends that have relied on subdued inflation expectations. First would be the impact on the yield curve. Post GFC, the yield curve steepened significantly as fiscal policy eased, but reversed as soon as austerity measures kicked in. Yields have fallen substantially since and yield curves flattened as inflation expectations have plummeted and monetary policy has remained easy.

    Fig 3: Yields have declined substantially since GFC

    However, this trend may reverse – a spike in US treasury yields and a steeper yield curve is possible if the fiscal stimulus sustains. This in turn would have positive repercussions on rate-sensitive equities, particularly financials and other ‘value’ sectors.

    Binary Outcomes

    The risk of higher interest rates also implies that policymakers need to strike the right balance. Too swift a rise in yields could increase the debt burden and complicate refinancing issues for governments. Equally, rising inflation with no change in nominal rates could impede central bank credibility.

    Central bankers over the past few decades have allowed market participants to price in appropriate risks and maintained stability in bond markets, in particular.

    However, if central bank actions begin to differ from their stated objectives due to other interests, market participants will find it difficult to accurately price in various scenarios, leading to lower market confidence, higher market volatility and hinder price transparency.

    But in today’s situation, central banks may be forced to maintain accommodative policies for longer periods to maintain the solvency and liquidity of the government, keeping front-end rates well anchored.

    If this were the case despite rising inflation, real rates would decline even further, and wealth transfer would take place from savers to borrowers. From an asset allocation perspective, this would imply greater weight on equity over bonds in portfolios in order to meet stated investment objectives.

    In our view, the unprecedented fiscal stimulus we have seen post-COVID-19 can lead to binary outcomes. If the deficits sustain, the world will evolve more akin to post-World War II with higher demand, higher inflation expectations, and steeper yield curves.

    Alternatively, if governments are forced to impose austerity measures once demand returns to normal, as with post-GFC, then the era of low rates and low inflation will continue for the foreseeable future.

    By Nupur Gupta

    Nupur Gupta is multi-asset portfolio manager Eastspring Investments, Singapore. Part of Prudential plc, Easpspring Investments is a global asset manager with Asia at its core, offering innovative investment solutions to meet the financial needs of clients.

  • Building a Thriving Online Business

    Building a Thriving Online Business

    Malaysia’s e-commerce industry is expected to continue its upward trajectory and rapid growth in 2020 and for many years to come.

    As an aspiring entrepreneur, the opportunity to ride on the sector’s coat tail is an intriguing and exciting one. Whether you have already launched an online business on one of the e-commerce platforms or are looking to get involved in your very first venture, now is the time to get your foot in the door.

    Indeed, data from German online statistics portal Statista reveals that Malaysia’s e-commerce market for 2019 generated a whopping revenue of US$3.68 bil (RM15.2 bil), with a prediction for annual market growth to reach 11.8% by 2023.

    DataReportal, meanwhile, revealed there were 26.69 million internet users in Malaysia as at January 2020. The number of internet users in the country increased by 919,000 (+3.6%) between 2019 and 2020, while internet penetration in Malaysia stood at 83% as at January this year.

    Source: Datareportal 

    Mapping E-commerce Growth

    For perspective, Shopee led the industry with the highest consumer downloads of its mobile application, according to iPrice Group Sdn Bhd’s Map of E-commerce report for the third quarter of 2019 (3Q19). The e-commerce platform also tops the list of the most visits to its websites at 25,789,300 monthly web visits.

    As for Lazada, the e-commerce platform had the highest number of monthly active users of mobile application in 3Q19, while breaking into the top five list of most visited websites is PG Mall, a homegrown online shopping mall.

    With technological advances and not to mention the growth of the internet economy, the e-commerce industry is set for an exciting ride in the next few years.

    E-commerce Malaysia chairman Ganesh Kumar concurs, saying the local e-commerce industry is expected to grow up to 30% in 2020, supported by advancement in technology and wider access to virtual buying platforms.

    “Currently, we are seeing more people buying online and trusting e-commerce sites. More merchants are also starting to sell their products online,” he said recently.

    Fast-changing E-commerce Landscape

    In the era of Industry 4.0, technological advances have had a massive impact on the e-commerce industry, transforming the way consumers connect with brands and empowering them to shop more cost-effectively.

    Driven by the convenience of making purchases without the need to visit a physical store, e-commerce has now become an integral part of everyday life. But while the shift in consumer behaviour is a given, businesses, too, are adopting a changing mindset when it comes to e-commerce.

    “Rather than seeing e-commerce as a competition, businesses have now come to see it as another stream of revenue which will complement their brick-and-mortar business,” Shopee regional managing director Ian Ho (pic) tells Smart Investor.

    These businesses, to cater to the increasing demands of today’s e-commerce landscape, have set up dedicated e-commerce teams to manage various facets of their operations.

    This includes manning the online store, pricing, handling orders, fulfilment, and customer service, as well as investing in warehouses that come equipped with advanced systems to organise warehouse operations.

    Evolving mindset aside, many businesses however find it difficult to grow their sales effectively after opening a store.

    “This is because of operational and marketing challenges. These businesses lack the know-how to nurture the business and run marketing efforts to increase exposure for their online stores and product offerings,” Ho reveals.

    Helping Hand from Shopee

    In Shopee’s case, the e-commerce platform has empowered many brands and sellers to succeed online because they understand the challenges that businesses face, and offer various forms of support to help them succeed.

    For example, Shopee University, a free seller’s workshop to provide sellers with the knowledge and skills to grow their businesses on the Shopee platform, was launched in 2016.

    From the workshop, participants will learn multiple ways to boost sales; tips and marketing techniques to promote their store on Shopee; the right way to list products; and how to fully utilise all of Shopee’s features to help promote sales.

    “What has made these workshops even more resourceful is that they are also available through web seminars, which means that participants anywhere with an internet connection can join in,” shares Ho.

    To date, around 10,000 sellers have benefited from the Shopee University modules.

    In addition to Shopee University, the e-commerce platform further launched Shopee Live in 2019 in an effort to bring users closer to their favourite sellers and brands.

    This allows brands/sellers to engage their users throughout the shopping journey via a wide array of live content such as product reviews, guides and demonstrations hosted by popular local influencers.

    And the results are pretty impressive, to say the least. Tyra Kamaruzzaman’s Beautyra lipsticks, for instance, sold out in minutes on Shopee Live, recording over 2,000 orders, while Photobook’s store traffic and visibility increased by 18x after running a 45-minute live stream on Shopee Live.

    “In addition to driving orders, Shopee Live is also effective in driving traffic and followers to the retailers’ stores, as indicated by Shopee seller wanjojo of JJ70 Store who gained more than 800 store followers after a single live stream.

    “Another seller also shared that by doing daily live streams, he was able to rapidly gain followers and double his sales in less than three months, with 2019 being the first time he had managed to break the RM1 mil mark in annual sales,” Ho shares, adding the results are testament to Shopee Live’s success.

    Success: an effort of both parties

    Over the years, many businesses have achieved success on e-commerce platforms, but many others have also not done well. So how does a business guarantee its success online?

    PG Mall managing director Datuk Wira Louis Ng believes that success on e-commerce platforms stems from the effort of both parties, namely the platform operator and the merchant.

    “Successful merchants on the PG Mall platform put in a lot of effort from their end to build store awareness and visibility by participating in all PG Mall-related activities and campaigns.

    “In addition to providing attractive prices, these merchants are very committed, have zero cancellations rate, are very responsive to shoppers’ enquiries, and are efficient in processing orders to ensure a positive shopping experience.”

    On the flipside, there are merchants who – after setting up their online store – solely rely on the platform to drive sales without going all out and taking the initiative to do more, he adds.

    Merchants on the PG Mall platform are supported with regular creative campaigns that partner with different e-wallets and banks to drive both sales and traffic to the stores.

    PG Mall is also the only platform to partner with all major e-wallets in the country. The vast check-out options available will in turn gives merchants a boost in capturing more shoppers.

    On how merchants can conduct a successful business on PG Mall, Ng points out that PG Mall’s mission is to be the number one choice when it comes to online shopping, and therefore, it is always best for merchants to feature all products on hand to be available on the PG Mall platform.

    “Providing a fair price for shoppers is essential, as is the effort put into managing the store by putting up clear and attractive images as well as the right product descriptions.

    “While Success on e-commerce platforms stems from the effort of both parties, namely the platform operator and the merchant. these may sound trivial, these are factors that will influence a shopper’s final decision.”

    The homegrown e-commerce platform, which cites gold jewelleries, groceries and pets, as well as home appliances as its current best-performing categories, are in the midst of bringing in more brands to join the PG Mall family.

    Trusted Delivery Service

    Delivery service is a crucial aspect of online businesses, as it allows for the efficient and timely transportation of goods to customers.

    In today’s world, customers expect fast and reliable delivery, and the ability to track their orders in real-time. This is especially true for e-commerce businesses.

    Use Delyva as your main delivery platform that allows you to choose the best delivery service in Malaysia by price, speed, area coverage and reliability.

    By Bernie Yeo

    Find out more about Delyva here: https://delyva.com/my/delivery-service-in-malaysia/