Inovatif

Category: Investments

  • ECB starts to ease, but how far can interest rates fall?

    ECB starts to ease, but how far can interest rates fall?

    June 2024

    Azad Zangana, Senior European Economist & Strategist 

    While back-to-back cuts are unlikely, there is plenty of room for the European Central Bank to surprise cautious investors, according to Azad Zangana, Senior European Economist & Strategist at Schroders.

    The European Central Bank (ECB) has announced that its three main policy interest rates will be lowered by 25 basis points – the first cut in rates in almost five years. The move was unanimously expected by economists and almost fully priced by financial markets following strong hints of imminent easing by members of the Governing Council.

    Attention now turns to the future pace of easing which remains uncertain. An above-consensus rise in May’s Harmonised Index of Consumer Prices (HICP) inflation rate to 2.6% year-on-year had raised questions as to whether the ECB would cut at all. The unexpected print also clearly influenced the press conference communication following the decision.

    ECB staff projections for the headline annual inflation rate were raised for this year from 2.3% to 2.5%, and from 2% to 2.2% for 2025. However, the projections for 2026 remained unchanged at 1.9%, suggesting ongoing confidence that policy will return inflation to target. Indeed, during the press conference, ECB president Christine Lagarde explained that staff expect inflation to fluctuate above target for the rest of this year and into next year, before returning to the 2% target in the second half of 2025.

    Lagarde stated that while interest rates have been lowered, they remain restrictive, and will need to fall much further before they are considered to be neutral. This suggests that interest rates are likely to be lowered further over the rest of this year, even if inflation remains somewhat elevated.

    Lagarde also explained that the main cause for the persistence in inflation was a catch-up effect of wages to past price increases. This catch-up is now causing services companies to increase their prices. We can see this in the higher rates of services inflation compared to goods and the headline measure (see chart 1, below). Lagarde also mentioned that early indicators suggest wage growth is now stabilising. Meanwhile, data showing that companies are not passing on the full cost of wage increases (at the detriment of profits), suggests that inflation is likely to moderate.

    If the ECB is confident that the economy is on the right track, how fast can interest rates fall?

    Polling conducted by Reuters before the decision shows that the consensus amongst economists is for the ECB to cut rates twice more (quarter-point cuts) by the end of this year, and three times in 2025. However, investors appear to be more cautious. Pricing based on forwards of overnight index swaps (OIS) show that less than one more cut is priced for the second half of this year, and only two cuts for next year (see chart 2, below).

    By contrast, Schroders’ forecast is more optimistic, with three more cuts forecast this year, and two the next. This suggests some upside for both European fixed income markets (lower yields mean higher prices) and equity markets, which would be supported by higher economic growth, and lower discount rates.

  • RAM-CTOS BCI: Sustained business optimism in 2Q 2024

    RAM-CTOS BCI: Sustained business optimism in 2Q 2024

    KUALA LUMPUR, 11 July 2024 – The 2Q 2024 RAM-CTOS Business Confidence Index (BCI) survey indicated that businesses remain broadly optimistic. The overall index came in at 54.0 (1Q 2024: 53.4), staying above the neutral level of 50 for the second consecutive quarter. Corporate sentiment reached a high of 59.3 in 2Q 2024, up from 57.1 in 1Q 2024, while SMEs remained optimistic at 52.6 slightly down from 53.0 in the previous quarter.

    Figure 1: Overall business sentiment continues to improve in 2Q 2024

    * The RAM-CTOS sub-index commenced in 1Q 2022. Data points prior to this are derived from the main RAM BCI. The threshold that indicates positive sentiment is 50.

    Sources: RAM BCI and RAM-CTOS BCI MCO = Movement Control Order

    Respondents were more sanguine about their business performance outlook in 2Q 2024, with q-o-q improvement in both the sales (+2.1 points to 56.4) and profitability sub-indices (+1.5 points to 50.5). However, profitability sentiment remains relatively soft, just above the 50 neutral mark, inhibited by ongoing cost pressures. Rising cost of doing business continue to top the list of challenges, cited by nearly 80% of the 109 respondents, although this is a decrease from 90% in the previous quarter.

    “It is heartening to see positive sentiments in consecutive quarters, which bucks the trend of the past year. As business agility remains key in the coming quarters, we will continue to support businesses by providing real-time data analytics, digital solutions and on-ground training opportunities to ensure that SMEs are equipped to prosper through good times and remain prepared for future challenges,” said Erick Hamburger, Group CEO of CTOS Digital Berhad.

    Diesel subsidy retargeting appears to have minimal impact on sentiment

    Our survey results also show that the recent diesel subsidy retargeting did not appear to have dented sentiment of respondent firms. The 2Q 2024 survey was conducted from 27 May to 18 June. Based on responses received prior to the policy implementation on 10 June, overall sentiment index for corporates and SMEs would amount to 58.0 and 52.9 respectively. Reponses received after 10 June showed a higher sentiment index for corporate at 60.7, while SME sentiment was marginally lower at 52.2.

    Regarding the upcoming phase-out of blanket RON95 subsidies, around 67% of the 109 firms polled anticipate price increases for their products or services. Around 70% of respondents reported that RON95 constitutes up to 10% of their overall business costs.

    Figure 2: Sentiment remained healthy after diesel subsidy retargeting   Figure 3: Majority of firms surveyed anticipate price increases

    Source: RAM-CTOS BCI

    Concerns over increase in labour costs from progressive wage policy

    Firms are most concerned about the impact of higher labour costs arising from implementation of the progressive wage policy (PWP), as cited by around 61% of firms. This is followed by uncertainties regarding productivity benchmarks (46%) and compliance costs (42%). Despite these concerns, about 78% of firms foresee some benefits from the adoption of PWP, with enhanced employee morale and satisfaction (53%), greater talent attraction and retention (47%) and improved employee productivity (40%) being the most cited benefits.

    Figure 3: Needs in government assistance differ across business segments

    * Percentages sum to more than 100% as firms are allowed to pick more than one response Source: RAM-CTOS BCI

    Need for increased communication and marketing of PWP

    While the PWP is a much-discussed plan among policymakers and researchers, efforts to educate and market it to businesses can be further improved. Our survey indicates that some 52% of respondents have heard of PWP but are not familiar, while almost a quarter stated they are not aware of it at all. Interest is also fairly low, with only about 7% of firms surveyed indicating they would voluntarily participate and the majority, circa 64%, are undecided.

    “We welcome the implementation of the PWP, given the potential benefits of a restructured wage system, which links wage increases to training and upskilling. However, a more broad-based adoption is needed to realise its full benefits to the nation as a whole,” said Chris W.K. Lee, RAM Holdings Berhad Group CEO and Executive Director.

  • Investment Strategies for a Rosy Portfolio

    Investment Strategies for a Rosy Portfolio

    As the financial landscape of 2024 unfolds with global uncertainties, explore strategic investment insights for building a resilient portfolio in the face of market volatility and opportunities.

    As we embark on the journey through 2024, investors are met with a landscape brimming with both opportunities and challenges. With a record number of elections globally, including the pivotal November US elections, and a backdrop of geopolitical tensions and lingering pandemic concerns, the year ahead promises to be one of volatility. However, amid this uncertainty, there are strategies investors can employ to build resilient portfolios and capitalise on market opportunities.

    Strategic Asset Allocation
    One of the cornerstones of building a resilient portfolio is strategic asset allocation. This involves distributing investments across different asset classes, such as equities, bonds, cash and cash equivalents, property and alternative investments, in a manner that aligns with one’s risk tolerance, investment goals and time horizon.

    In 2024, amid the potential for geopolitical tensions and economic uncertainty, diversification across asset classes will become even more crucial. By spreading investments across various assets, investors can mitigate the impact of any single event or market downturn on their overall portfolio. For instance, while stocks may offer growth potential, fixed income can provide stability during times of market volatility, while alternative investments with a negative correlation to equities can help reduce overall portfolio risk and volatility.

    Smart Diversification
    Diversification within asset classes is equally important. Within the stock portion of a portfolio, for example, investors should consider diversifying across sectors, industries and geographic regions. This can help reduce the risk of concentrated exposure to any one sector or region-specific event.
    Furthermore, alternative investments such as real estate, commodities and cryptocurrencies can offer additional diversification benefits. These assets often have low correlations with traditional stocks and bonds, providing a hedge against market downturns and inflationary pressures.

    Ringgit Cost Averaging
    In times of market volatility, emotions can run high, leading investors to make impulsive decisions that may not align with their long-term goals. Ringgit cost averaging (RCA) offers a disciplined approach to investing that can help mitigate the impact of market fluctuations.

    With RCA, investors commit to investing a fixed amount of money at regular intervals, regardless of market conditions. This strategy allows investors to buy more when prices are low and fewer when prices are high, ultimately lowering the average cost over time.

    Investing Beyond Borders
    Investors are encouraged to venture beyond their home country for investment opportunities, recognising the risks associated with concentrating investments in a single region. Global diversification provides access to a broader range of opportunities, potentially capitalising on faster-growing economies and emerging industries.

    This approach also serves as a risk management strategy, helping to mitigate the impact of currency fluctuations and geopolitical events that may affect a specific market.

    In 2024, promising investment prospects can be found in countries such as the United States, Japan, Taiwan and South Korea. The United States stands out for its diverse economy, innovative companies, and robust financial market, making it a crucial element in many global investment portfolios.

    Japan, despite facing economic challenges and an ageing population, remains a leader in technology and manufacturing, with opportunities in sectors like robotics, healthcare, and renewable energy. Taiwan and South Korea, home to world-leading technology firms, particularly in semiconductors, present appealing growth opportunities.

    Diversifying across these geographies enables investors to tap into diverse industries, currencies, and economic cycles, enhancing portfolio resilience and potentially boosting returns.

    Riding the Commodities Wave
    In 2024, commodities are likely to shine, driven by a confluence of factors including supply chain disruptions, inflationary pressures and increased demand from emerging markets. The stage is set for a commodities supercycle, with metals, energies and agriculture expected to lead the charge.
    Investors can capitalise on this trend by allocating a portion of their portfolios to commodities or commodity-related assets. These assets can serve as a hedge against inflation and provide diversification benefits during periods of market uncertainty.

    Unlocking Crypto Potential
    The crypto market continues to evolve rapidly, presenting both opportunities and risks for investors. The approval of spot bitcoin ETFs in January 2024 by the US Securities and Exchange Commission (SEC) marks a significant milestone for the industry, signalling growing acceptance and mainstream adoption.
    Additionally, the Bitcoin halving event, which occurs approximately every four years and reduces the rate at which new bitcoins are created, has historically been associated with price appreciation. While cryptocurrencies remain volatile and speculative assets, they can offer diversification benefits for investors with a high-risk tolerance and a long-term investment horizon.

    Another new development in Malaysia is staking approval by Malaysia’s Securities Commission (SC), allowing crypto using a proof-of-stake concept like Ethereum to be staked and being rewarded with additional crypto for helping to validate the blockchain.

    Tapping into REITs
    Real Estate Investment Trusts (REITs) have faced headwinds in recent years due to factors such as interest rate hikes and stagnating market prices. However, for investors with a long-term perspective, REITs can still play a valuable role in a diversified portfolio, offering steady dividends while looking forward to the next property market recovery cycle.

    REITs offer exposure to income-generating real estate assets such as commercial properties, residential complexes and infrastructure projects, including logistic hubs and data centres. Despite short-term challenges, REITs can provide stable cash flows, inflation protection and potential capital appreciation over the long term.

    Building a resilient investment portfolio requires careful planning, diversification and a disciplined approach to investing. By following these strategies and staying attuned to market trends, investors can navigate the opportunities and challenges of 2024 with confidence and build a foundation for long-term financial success.

    ABOUT THE WRITER
    Stephen Yong is an Executive Director at Wealth Vantage Advisory, driving strategic growth. He also actively promotes financial literacy to help Malaysians simplify and grow towards financial freedom.

  • Evaluating Bitcoin as a Store of Value in 2024

    Evaluating Bitcoin as a Store of Value in 2024

    Examine Bitcoin’s evolution, factors influencing its role as ‘digital gold’, and the key narratives shaping its trajectory in 2024.

    In 2023, Bitcoin displayed a remarkable rebound, surging more than 150% in value from US$16,000 to over US$42,000, significantly outperforming traditional investments like gold (+13%) and the S&P 500 (+25%). Its resurgence not only increased its crypto market dominance to over 50% of the total crypto market cap, but also marked a significant shift in investor sentiment.

    Then again, given its volatile nature, many wonder if Bitcoin can truly serve as a reliable store of value over time.

    In this analysis, we’ll dive deep into Bitcoin’s journey, from its evolution to the dynamics shaping it as an asset class, its performance history and what it might mean for you as an investor.

    The Bitcoin Evolution

    The origins of Bitcoin trace back to a nine-page document published by an anonymous person or entity known as Satoshi Nakamoto, which outlined the concept of a new digital currency that would operate independently of centralised authorities such as banks and governments. Key to its subsequent design is a limited supply of 21 million coins and immutability, with its unparalleled adoption rate distinguishing it from other cryptocurrencies and protecting against inflation and monetary debasement in the fiat world.

    Over time, perceptions of Bitcoin as an asset class have evolved across the bull cycles in 2013, 2017 and 2021, with surges of 20-100x at each cycle followed by 75-90% drawdowns, turning it into a sought-after investment despite its early-stage volatility. As interest surged, so did scrutiny and challenges, but such fluctuations are natural for an innovation that’s only 15 years old.

    Recently, the perspective on cryptocurrencies, particularly Bitcoin, has shifted significantly, with Blackrock CEO Larry Fink likening them to ‘digitalised gold’. In a July 2023 Fox Business interview, Fink described Bitcoin as ‘an international asset’, suggesting it could serve as an investment similar to gold, offering protection against the economic difficulties of any given country.

    This marks a notable change from Fink’s 2017 stance, where he criticised Bitcoin’s association with money laundering, showcasing a significant shift in the financial community’s view towards Bitcoin and its legitimacy as an asset class.

    Factors Influencing Bitcoin’s Maturation

    Bitcoin’s impressive rally throughout 2023 can be attributed to three main factors. Initially, the cryptocurrency was undervalued following the collapse of FTX in late 2022. Then, events like the US debt ceiling standoff in January 2023 and failures among US regional banks in March 2023 highlighted Bitcoin’s appeal as a safe-haven asset.

    Further momentum was gained in the second half of 2023 when financial giants such as BlackRock, Invesco, and Franklin Templeton submitted applications for spot Bitcoin ETFs, bolstering the narrative of Bitcoin as a ‘store of value’, which were granted regulatory approval on 10 January 2024, allowing investors easier access to the cryptocurrency. This move has not only lent credibility to cryptocurrencies but also positioned them as a viable emerging asset class.

    While there might be a shift towards even riskier crypto assets in the coming year, it’s anticipated that institutional support for Bitcoin will remain strong, at least through the first half of 2024. Bitcoin has notably outperformed traditional assets in the latter half of 2023, and this trend is expected to carry on into 2024.

    Looking Ahead: Where Will Bitcoin’s Price Go?
    Beyond the usual fluctuations, Bitcoin’s price trajectory in 2024 is subject to several structural narratives. The first would be the potential for growing institutional adoption, especially after the landmark decision by the US Securities and Exchange Commission to approve 11 spot Bitcoin ETFs in the US.

    In the wake of the SEC’s decision, though, Bitcoin was once again a victim of ‘sell-the-news’. BTC fell from a launch-day high of US$49,200 to a low of near US$38,500, though it has since moderately recovered back to its 2023 levels of US$42,500 in the weeks after the ETF launches. Standard Chartered Bank expects that these ETFs could result in up to US$100 billion of new inflows into the space. Naturally, their year-end price target for Bitcoin is also a lofty one at US$100,000.

    The second would be the price action surrounding the Bitcoin halving event in mid-April 2024, which will reduce the reward for mining new Bitcoins from 6.25 BTC to 3.125 BTC. Halving has a structural impact in Bitcoin price by systematically reducing the number of Bitcoins that miners receive from mining new blocks, which leads to a halving of selling pressure in this segment of the Bitcoin ecosystem. Pre-halving also leads to short-term selling pressure as Bitcoin miners sell a bit more aggressively to buffer their coffers for more challenging times ahead.

    Lastly, macroeconomic factors should also play a role. The risk of higher rates for longer is currently not well priced by the market, which expects the US Federal Reserve to cut rates by 125 basis points in 2024 (vs. the Fed’s own projection of 75 basis points). This should introduce a bit more volatility into prices in the short term, especially if geopolitical risks escalate. Given that it is also an election year in the US, one could reasonably expect that financial conditions will eventually shift to become looser. Asset price performance tends to be backloaded during election years, and Bitcoin could follow this trend.

    All in all, further consolidation in Bitcoin’s price looks likely in the near term, with the potential for a new YTD low to be reached. The sell-the-news story in Bitcoin does have legs due to structural reasons, such as outflows from the Grayscale Bitcoin Trust ETF (GBTC) and pre-halving sell pressure from miners. As we cross through the halving and into the May-October presidential year seasonality, we would expect price action to take a more bullish turn, barring unforeseen events. If the previous three Bitcoin cycles are any indication, we will see an all-time high in Bitcoin in the coming one or two years.

    Strategies for Incorporating Bitcoin into Investment Portfolios
    For investors looking to navigate the Bitcoin market, unsurprisingly, traditional investment principles can be considered, namely:

    1. Diversification
    Bitcoin should form one part of a diversified portfolio, balanced with other asset classes, to manage risk more effectively.

    According to Modern Portfolio Theory, which has been both theoretically and empirically supported over the past 15 years with Bitcoin, incorporating a high-risk, high-return, uncorrelated asset like Bitcoin can significantly enhance the risk-adjusted returns of portfolios, whether they are conservative or aggressive in nature.

    The uncorrelated nature of Bitcoin has proven to (mind-blowingly) reduce volatility in conservative portfolios with somewhere between a 1-2% allocation and with the expected increase in expected return.

    2. Risk Assessment
    Given Bitcoin’s volatility, investors must carefully evaluate their risk tolerance and investment horizon. This evaluation will help determine the suitable allocation in their portfolio, which may range from low single-digit percentages for conservative investors to up to 10% or slightly more for those with a more aggressive investment strategy.

    3. Regular Review and Rebalancing
    The cryptocurrency market’s dynamic nature requires investors to conduct regular portfolio reviews and rebalancing, ideally on a quarterly basis. This practice ensures that the portfolio maintains the desired risk-return profile over time. Additionally, it enables investors to adhere to the investment mantra of ‘buy low, sell high’, which is equally applicable to cryptocurrencies.

    ABOUT THE WRITER
    Hann Liew is the founder and CEO of Halogen Capital.

  • Uncovering Asset Gems: 2024 Morningstar Awards for Investing Excellence – Malaysia

    Uncovering Asset Gems: 2024 Morningstar Awards for Investing Excellence – Malaysia

    In this exclusive interview, Morningstar’s newly appointed Managing Director for Southeast Asia, Shihan Abeyguna, discusses how the awards have underpinned investment excellence in Malaysia, Morningstar’s growth plans for Southeast Asia, and the company’s diverse range of products and services.

    As investors navigate 2024’s mixed market conditions, insights from research powerhouse Morningstar are more valuable than ever. In a wide-ranging interview, newly appointed Managing Director Shihan Abeyguna provides an in-depth look at key trends shaping Malaysia’s asset management industry, Morningstar’s growth strategies for Southeast Asia and the company’s diverse product and service offerings designed to empower investors.

    Discussing 2023’s Malaysian fund award winners, Abeyguna highlights exemplary funds that succeeded despite last year’s lacklustre domestic equities. He also examines broader asset management trends including sustainability, alternative, global diversification and personalisation.

    Detailing plans to expand Morningstar’s data and research coverage, Abeyguna emphasises the company’s commitment to equipping investors and institutions to build holistic, customised portfolios aligned with financial objectives and personal values.

    Shihan Abeyguna
    Managing Director, Southeast Asia, Morningstar

    SmartInvestor (SI): Tell us more about this year’s winners in Malaysia and how Morningstar assessed their investment approaches.

    Shihan Abeyguna (SA): Our approach to recognising excellence in fund management is multifaceted, focusing not just on past achievements but also on future potential. This holistic methodology involves analysing risk-adjusted returns with a qualitative overlay to gauge a fund’s ability to serve investors’ best interests going forward.

    Quantitatively, we assess both recent and medium-term performance for each fund. A winning fund must have ranked in the top half of its peer group in 2023 as well as posted strong results for investors over the past three years. Qualitatively, we conduct checks on the accessibility of each fund to local retail investors and lead management stability, among other factors.

    The winners of this year’s awards in Malaysia demonstrated exceptional skill in navigating the market conditions of 2023. Malaysian equities faced a challenging 2023, but our domestic equity fund winners prevailed.

    Malaysian large-cap equity category winner Maybank Malaysia Ethical Dividend and Malaysia large-cap equity (Shariah) category winner PMB Shariah Tactical, for example, benefitted from overweight positions in information technology, the best-performing sector domestically in 2023. Notably, the PMB fund returned a whopping 24% (in MYR terms) in 2023. Meanwhile, Asia Pacific equity category winner PB Asia Pacific Dividend was overweight in financials and energy, which benefitted from stylistic tailwinds as value sectors outperformed in the region.

    The Malaysian bond market exhibited greater resilience in 2023, and our winning fixed income funds provided extra cushioning for investors amid equity market fluctuations. Malaysia bond category award winner AmDynamic Bond gained 8.3%, ranking in the fifth percentile of peers in 2023. AmanahRaya Unit Trust, meanwhile, gained 5.5% and won the Malaysia Bond (Shariah) category for the fourth consecutive year.

    SI: Following the recognition of this year’s award winners, could you discuss the key trends currently shaping the asset management industry in Malaysia?

    SA: Last year marked a remarkable rebound for the global financial markets, a turnaround from the gloom of 2022. Morningstar’s Global Market Index delivered over 20% in 2023, but this is just an aggregate picture. The regional performance for Asia was mixed. There were positive performances from markets like Japan, Korea, and India and underperformance in China, Hong Kong and Thailand. Malaysia’s market showed minimal movement in 2023.

    Even though the overall markets did well last year, investors were sitting on the sidelines. This is supported by our fund flow data, where most fund flows in 2023 went into money markets and fixed income products. This risk off sentiment was no surprise considering the turbulent markets in 2022 and the higher yields.

    In terms of trends, a few I would like to highlight are sustainability, alternatives, global diversification and personalisation. On sustainability, even though we have seen tempered flows into broad based ESG products, we have seen a steady increase in fund flows into climate solutions. Asia accounts for more than 50% of global greenhouse gas emissions, and I believe there will be continued emphasis on the ‘E’ part of ESG led by institutional investors. On alternatives, with the continued convergence of public and private markets, private equity and credit will serve as important diversifiers in investor portfolios.

    Considering the muted performance of Malaysian markets, I believe investors will continue to demand globally diversified portfolios from asset managers. No trend discussion is complete without addressing the impact of technology and generative AI. The recent developments in technology will only accelerate investment solutions to be more personalised, not only to deliver financial outcomes but also to incorporate investor preferences and values.

    SI: As the newly appointed Managing Director for Southeast Asia, what are your plans to grow Morningstar’s presence here?

    SA: One of our primary strategies for this region is to meet the needs of the evolving investors’ portfolios, whether it is global access or varied investment vehicles. Morningstar has built its brand by providing insights on unit trusts, but over time we have expanded our data and research sets so that we can provide deeper insights on multiple asset types such as equities, ETFs, fixed income, structured products and alternatives.

    We will continue to add or partner with third party data providers to expand our data sets so that investors can holistically analyse their portfolios. Our goal is to be an enabler with independent research and insights for institutions to personalise investor portfolios.

    Even though we saw a reduction in global fund flows into ESG products in 2023, it is no less popular with investors who have taken the time to understand ESG. We believe in this secular trend because the need is clear. Large amounts of private capital are needed to mitigate and adapt to man-made externalities. Morningstar Sustainalytics is an elite brand in the ESG research space among academics and institutional investors. Our plan is to continue to innovate and provide leading ESG investor insights to capital allocators in the region.

    There were multiple factors that led to the growth of private markets after the financial crisis. The growth may have slowed with increased yields, but private equity has held up well. We have also seen an increase in private credit, with traditional lenders looking to de-risk their balance sheets. Pitchbook, a Morningstar company and a leading provider of data and research on private markets, has recently set up Singapore as its Asia headquarters to serve the needs of the region.

    SI: How does Morningstar assist investors in identifying and selecting the right fund managers while also guiding them on the significance of staying invested rather than trying to time the market perfectly?

    SA: Our research demonstrates the pitfalls of attempting to time the market, primarily the risk of missing out on the market’s best days, which can significantly impact long-term returns. Instead, we advocate for a disciplined approach to investing, focusing on long-term objectives rather than short-term market fluctuations.

    We have both quantitative and qualitative research to help investors identify fund managers who can beat their peers. For quantitative metrics, one of the primary indicators that we provide is the Star Ratings, which are based on risk-adjusted performance rankings for similar funds. We also have over 110 research analysts who qualitatively evaluate the funds based on factors such as fees, the fund’s investment process, the portfolio management team, risk management practices and the overall investment strategy.

    Morningstar also provides educational resources and research articles to help investors understand the principles of successful long-term investing. Through articles, videos, webinars and podcasts, Morningstar educates investors about the benefits of staying invested over the long term and the pitfalls of attempting to time the market.

    SI: Morningstar is known for its diverse products and services, including Mo, PitchBook and Sustainalytics. How can these support investors here, and what role do you envision them playing in the region’s evolving financial landscape?

    SA: Our range of products and services is designed to cater to a wide spectrum of investors, addressing varying objectives, experience levels and interests in specific assets or sectors. For instance, Mo, Morningstar’s AI-powered digital research assistant, harnesses the Morningstar Intelligence Engine to make our equity research, managed investment research and editorial content readily accessible. This tool is particularly invaluable for investors looking to navigate the vast amounts of information available and make informed decisions quickly.

    As the financial landscape in Southeast Asia evolves, tools like Mo, along with insights from the Morningstar suite like PitchBook and Sustainalytics, will play a pivotal role. They empower investors to build diversified portfolios across asset classes that not only align with their risk tolerance and investment goals but also allow them to personalise portfolios based on investor preferences or value.

    Methodology: The Morningstar fund category awards are based on Morningstar fund data as of 31 December 2023. The awards methodology emphasises the one-year period, but funds must also have delivered strong three-year returns after adjusting for risk within the award peer groups in order to obtain an award. In selecting winners, fund returns are adjusted for risk using the Morningstar Risk, a measure which imposes a higher penalty for downside variation in a fund’s return than it does for upside volatility.

  • Invest Johor’s Vision Unveiled

    Invest Johor sets its sights on a future where the state stands as a prominent global player, extending its economic reach beyond traditional sectors to embrace new frontiers that will shape the global economic landscape in the coming decade. The focus of these efforts spans a diverse array of industries, ranging from technology and innovation hubs to renewable energy, biotechnology, logistics, tourism, and smart city development. The strategic intent is clear – Johor aims to create an economic landscape that not only attracts global investments but also nurtures sustainable and inclusive growth within the state.

    In the realm of technology and innovation, Johor is positioning itself to become a hub that attracts investments in research and development, technology parks, and startup incubators. The global push towards sustainability is not lost on Johor, as it actively seeks investments in renewable energy, emphasizing solar, wind, and other green technologies as significant drivers of economic growth. With advancements From Tech Marvels to Sustainable Hubs, the Blueprint for Johor’s Global Economic Triumph. By Gunaprasath Bupalan in biotechnology and an ageing global population, investments in healthcare and biotech industries, including research facilities and pharmaceutical manufacturing, are gaining prominence.

    The rise of e-commerce has reshaped supply chain dynamics, and Johor, with its well-developed logistics networks, is poised to attract investments in efficient logistics and distribution centres. Additionally, the state’s strategic location and natural attractions make it an attractive destination for tourism and hospitality investments, including hotels, resorts, and infrastructure development to support the burgeoning tourism industry.

    Education and training facilities are not overlooked in Johor’s economic vision. Recognizing the long-term benefits of a skilled workforce, the state is actively investing in universities, vocational training centres, and programs that align with emerging industries. The concept of smart cities, integrating technology to enhance the quality of life for residents, is also part of Johor’s forward-thinking approach, focusing on sustainability, connectivity, and efficient resource management.

    As technology continues to reshape the financial industry globally, Johor is not lagging. Investments in financial services and fintech are seen as drivers of economic growth, encompassing the establishment of fintech hubs, support for startups, and the adoption of digital financial solutions. Sustainable agriculture practices and agribusiness investments are also part of Johor’s strategy for economic diversification, involving precision farming, agro-processing, and the development of agricultural technology.

    However, the success of these visionary investments depends on various factors, including government policies, infrastructure development, regulatory frameworks, and the ability to attract and retain talent. Johor recognizes the need to create an environment that fosters innovation, collaboration, and sustainable practices to ensure the realization of its economic aspirations.

    Beyond the strategic economic initiatives, Invest Johor is keenly focused on leveraging the state’s rich heritage. From a historical gateway to a modern economic powerhouse, Johor’s journey reflects resilience and adaptation. Invest Johor places a strong emphasis on strategic infrastructure development, enhancing transportation networks, logistics hubs, and technology parks to attract businesses involved in cutting-edge industries.

    Facilitating collaboration between industries and creating specialized clusters is another strategy to enhance competitiveness. The idea is to build ecosystems where companies, research institutions, and startups can collaborate and benefit from each other’s expertise. To attract investments in disruptive technologies, Invest Johor, in collaboration with MIDA, offers targeted incentives for companies involved in sectors such as biotechnology, information technology, and advanced manufacturing. These incentives may include tax breaks, grants, and other financial incentives to encourage businesses to establish and expand their operations in Johor.

    “The concept of Invest Johor is rooted in creating a dynamic economic landscape that not only attracts investors but also nurtures sustainable and inclusive growth in the state.”

    Talent development and retention play a crucial role in sustaining Johor’s economic momentum. Invest Johor collaborates with Unit Modal Insan Negeri Johor to focus on developing and retaining a skilled workforce. This involves collaborating with educational institutions to ensure that the local workforce is equipped with the necessary skills for emerging industries. The establishment of training programs and partnerships with universities and vocational schools is part of this long-term vision.

    Digital transformation is recognized as a key driver for staying at the forefront of economic development. Invest Johor supports businesses in adopting digital transformation strategies, including e-commerce, Industry 4.0 technologies, and smart city initiatives. This commitment to embracing digital technologies aligns with the global trend towards Industry 4.0 and the increasing reliance on digital solutions across various sectors.

    Sustainable development is a core principle guiding Invest Johor’s initiatives. The organization actively promotes sustainable practices in industries such as renewable energy, eco-tourism, and green infrastructure development. This commitment aligns with the region’s dedication to responsible and future-oriented economic growth. The emphasis on sustainability reflects a global shift towards environmentally conscious practices and resonates with investors who prioritize Environmental, Social, and Governance (ESG) factors in their decision-making.

    Invest Johor’s efforts extend beyond economic growth to actively engaging with the younger generation and entrepreneurs. The emphasis on attracting young talent and fostering a thriving millennial ecosystem is seen as a critical component of Johor’s economic strategy. Concrete examples of successful initiatives and stories showcase how the state leverages the dynamism of the youth to fuel economic growth and innovation.

    The responsible investor of today prioritizes ESG factors, and Invest Johor recognizes this shift. The organization takes measures to ensure that development in Johor is sustainable and environmentally responsible. This includes prioritizing green infrastructure development, supporting renewable energy initiatives, and ensuring compliance with environmental regulations. The role of investors in contributing to a green and equitable future is highlighted, encouraging them to be part of the sustainability journey in Johor.

    Johor’s embrace of disruptive technologies like AI and biotech positions it as an attractive destination for global tech giants and innovative startups. The article highlights some of the most exciting tech-driven projects or initiatives that are drawing attention from the global tech community. It also provides insights into how investors can contribute to building Johor’s tech ecosystem and harness its potential for future growth.

    The human element is not overlooked in this economic narrative. Real-life success stories of local entrepreneurs and foreign investors who found their dreams and profits in Johor are shared. These stories serve to resonate with readers, offering tangible examples of the opportunities and support provided by Invest Johor. The inclusion of investors’ testimonial videos adds a personal touch to the narrative, bringing the success stories to life.

    Invest Johor’s commitment to “Building a Better Johor Together” emphasizes active engagement with local communities. The organization recognizes the importance of inclusive and equitable growth, and this involves understanding the unique needs, challenges, and aspirations of the local community. The article provides insights into how investors can actively engage with local communities, building partnerships, measuring, and reporting impact, seeking input and feedback, and committing to long-term collaboration.

    To differentiate itself from other regional investment hubs like Singapore or Vietnam, Invest Johor leverages specific strengths, advantages, and strategic initiatives. The strategic location and connectivity of Johor, particularly its proximity to Singapore, provide a significant advantage. The focus on enhancing transportation and logistics infrastructure enhances connectivity and facilitates the movement of goods and people. Cost-competitiveness is highlighted as a key proposition, with lower operational costs compared to Singapore being an attractive factor for investors.

    “Johor’s economic strength lies in its strategic location, cost-competitiveness, and a diversified approach to industries. We envision a future where Johor stands out as a hub for innovation, sustainability, and vibrant economic activity, contributing significantly to Malaysia’s overall growth.”

    Invest Johor further distinguishes itself through the development of special economic zones and industrial parks with tailored incentives for specific industries. The organization promotes a diversified approach, highlighting specific industries or sectors where Johor has a competitive advantage or is experiencing rapid growth. The focus on innovation and technology, with the promotion of research and development centres, technology parks, and partnerships with tech-focused organizations, positions Johor as a forward-thinking investment destination.

    Sustainable development and a commitment to ESG factors are emphasized as differentiators for Johor. The integration of sustainable practices, including green infrastructure, renewable energy initiatives, and compliance with environmental regulations, aligns with the global trend towards responsible business practices. The ease of doing business and a supportive regulatory environment, along with a skilled workforce and education initiatives, are additional factors that contribute to Johor’s appeal as an investment destination.

    Looking ahead, Invest Johor envisions bold and audacious possibilities for Johor’s economic landscape in the next 5-10 years. While predicting the future is inherently challenging, envisioning transformative trends involves considering visionary scenarios. These include the emergence of Johor as a global innovation hub, a sustainable smart city with green infrastructure, a biotech and healthcare hub, a pioneer in renewable energy, a digital transformation epicentre, a global logistics and trade hub, a cultural and creative economy hub, and an integrated sustainable tourism destination.

    To prepare for disruptions and unexpected developments, Invest Johor outlines strategic measures to ensure adaptability and resilience. These include scenario planning, diversification of industries, maintaining an agile policy framework, investment in education and skills, international collaboration, digital infrastructure resilience, community engagement, environmental stewardship, crisis preparedness and response, and regular stakeholder consultation.

    Invest Johor’s vision for the future is comprehensive, spanning a diverse range of industries and focusing on sustainability, innovation, and inclusivity. The organization’s strategic initiatives and collaborative approach position Johor as a dynamic and forward-thinking investment destination. As the state navigates the complexities of a changing global landscape, Invest Johor remains committed to building a better future for Johor and contributing significantly to Malaysia’s overall economic growth.

  • The Rise of The Ibu Boss

    SmartInvestor got wind of a sisterhood unlike any other that was blooming in the heart of Kuala Lumpur. Kak Syahira, Kak Raghdah, and Kak Huda, three Malay mothers, weren’t just building families; they were building legacies. Being a group of financial planners at Redvest Wealth & Asset Management, their quiet revolution wasn’t waged on battlefields, but in the digital landscape, where they were forging a path towards financial security, faith, and family through the lens of Islamic finance. Immediately, we set out to have a chat with these remarkable women.

    Their story, one of resilience, ambition, and a deep understanding of the challenges faced by modern Malay families had garnered the attention of a renowned financial magazine. Today, they sat bathed in the warm glow of the studio lights, preparing for an interview that would unveil their journey to the world. Cameras swirled, mics crackled, and a palpable excitement filled the air.

    “So, ladies,” the interviewer began, “why do you think your story has resonated so deeply with the community?”

    Kak Syahira, the most experienced financial planner among the three, whose laughter could fill a room even as her eyes held the quiet wisdom of a thousand prayers, spoke first. “Perhaps,” she said, her voice warm and gentle, “it’s because we understand. We understand the juggle between family and ambition, the pressure to succeed while upholding our faith and traditions. We’re not just financial planners; we’re mothers, daughters, and sisters, who have navigated these same waters.” She further mentioned that she has helped many young mothers to avoid common financial mistakes such as, impulse buying, and high financing commitments.

    Kak Dhah, the strategist of the trio, with a serene smile and a mind as sharp as a scimitar, nodded in agreement. “Yes,” she added, her voice carrying the weight of experience, “we built our success not despite our families, but because of them. They are the driving force, the reason we strive to secure a brighter future, not just for ourselves, but for generations to come. We come from humble beginnings, as unit trust and insurance agents, to now as full-fledged financial planners, in order to provide clients with more holistic views on their financial matters.”

    Kak Huda, the youngest, vibrated with an infectious energy, her eyes sparkling with excitement. “And,” she chimed in, her voice brimming with optimism, “we do it all while embracing our faith. Islamic finance isn’t just about numbers; it’s about aligning our goals with our values, building prosperity through ethical means, and ensuring our legacies reflect not just wealth, but faith and community.”

    Their words hung in the air, heavy with truth and a shared vision. They weren’t just mothers seeking financial independence; they were Ibu Boss, weaving a tapestry of hope and security for their families and communities, thread by pixelated thread, in the vibrant world of the internet.

    And as the cameras rolled, their story unfolded a testament to the power of faith, family, and financial wisdom in the hands of three remarkable Malay mothers who were changing the landscape of Islamic finance, one pixelated post at a time.

    The interview flowed like a gentle river, each question revealing another facet of their lives and their mission. They spoke of their journeys, the challenges they faced as mothers trying to break into the traditionally male-dominated world of finance, and the strength they found in each other and their unwavering faith.

    Kak Syahira shared the heartwarming story of how her online presence blossomed from a desire to empower Malay women to become financially independent and achieve early retirement. Her relatable tips, peppered with personal anecdotes and a dash of humour, resonated with thousands, proving that motherhood and financial planning could co-exist, even thrive, under the same roof.

    Kak Dhah’s eyes glistened as she talked about “Kak Dhah, Benteng Keluarga,” her digital fortress of risk management and family protection. Her clients weren’t just numbers on a spreadsheet; they were families entrusted with her guidance. She taught them not just about insurance plans and emergency funds, but also about the importance of community support and ethical financial practices rooted in Islamic principles.

    Kak Huda’s infectious laughter filled the room as she described the impact of her platform with the hashtag #UrusHartaWarisTerbela, dedicated to demystifying the complexities of Islamic estate planning. Through engaging infographics and personal stories, she helped Malaysian families to understand the importance of building a legacy beyond wealth, a legacy of faith, values, and love passed down through generations.

    But it wasn’t all smooth sailing. They spoke of the initial resistance they faced, the whispers of doubt from those who questioned their unconventional path. Some called them dreamers, others rebels. But these Ibu Boss remained unfazed. They countered negativity with success, proving that motherhood and ambition could be a power couple, not competing forces. Other than that, their challenges in finding balance between family and career as working mothers have strengthened their resolve by coming together and help one another.

    “It’s about finding balance,” Kak Syahira emphasized, her voice firm yet laced with compassion. “Yes, we are mothers, but we are also individuals with dreams and aspirations. And by supporting each other, by sharing our knowledge and experiences, we can create a space where both motherhood and financial goals can flourish.”

    Kak Dhah nodded in agreement, her eyes conveying a quiet confidence. “We are not asking for permission,” she declared. “We are paving our path, a path where faith and finance intersect, where family remains at the heart of everything we do.”

    And Kak Huda, her eyes sparkling with the fire of hope, summed it up perfectly. “We are the Ibu Boss,” she said, her voice ringing with pride. “We are mothers, daughters, sisters, and leaders. We are weaving a brighter future, one pixelated thread at a time, and we won’t stop until every voice in our community is heard, every family empowered, and every legacy secured.”

    If their interview was live in front of a studio audience, it would have ended with a standing ovation, not just from the studio audience, but from the thousands of Malay families who followed their journey online. The story of the Ibu Boss was just beginning, but its impact was already undeniable. They were changing the landscape of Islamic finance, proving that in the tapestry of life, faith, family, and financial wisdom could create a masterpiece, a legacy not just for themselves, but for generations to come.

  • Invest Johor’s Vision Unveiled

    Invest Johor sets its sights on a future where the state stands as a prominent global player, extending its economic reach beyond traditional sectors to embrace new frontiers that will shape the global economic landscape in the coming decade. The focus of these efforts spans a diverse array of industries, ranging from technology and innovation hubs to renewable energy, biotechnology, logistics, tourism, and smart city development. The strategic intent is clear – Johor aims to create an economic landscape that not only attracts global investments but also nurtures sustainable and inclusive growth within the state.

    In the realm of technology and innovation, Johor is positioning itself to become a hub that attracts investments in research and development, technology parks, and startup incubators. The global push towards sustainability is not lost on Johor, as it actively seeks investments in renewable energy, emphasizing solar, wind, and other green technologies as significant drivers of economic growth. With advancements in biotechnology and an ageing global population, investments in healthcare and biotech industries, including research facilities and pharmaceutical manufacturing, are gaining prominence.

    The rise of e-commerce has reshaped supply chain dynamics, and Johor, with its well-developed logistics networks, is poised to attract investments in efficient logistics and distribution centres. Additionally, the state’s strategic location and natural attractions make it an attractive destination for tourism and hospitality investments, including hotels, resorts, and infrastructure development to support the burgeoning tourism industry.

    Education and training facilities are not overlooked in Johor’s economic vision. Recognizing the long-term benefits of a skilled workforce, the state is actively investing in universities, vocational training centres, and programs that align with emerging industries. The concept of smart cities, integrating technology to enhance the quality of life for residents, is also part of Johor’s forward-thinking approach, focusing on sustainability, connectivity, and efficient resource management.

    As technology continues to reshape the financial industry globally, Johor is not lagging. Investments in financial services and fintech are seen as drivers of economic growth, encompassing the establishment of fintech hubs, support for startups, and the adoption of digital financial solutions. Sustainable agriculture practices and agribusiness investments are also part of Johor’s strategy for economic diversification, involving precision farming, agro-processing, and the development of agricultural technology.

    However, the success of these visionary investments depends on various factors, including government policies, infrastructure development, regulatory frameworks, and the ability to attract and retain talent. Johor recognizes the need to create an environment that fosters innovation, collaboration, and sustainable practices to ensure the realization of its economic aspirations.

    “The concept of Invest Johor is rooted in creating a dynamic economic landscape that not only attracts investors but also nurtures sustainable and inclusive growth in the state.”

    Beyond the strategic economic initiatives, Invest Johor is keenly focused on leveraging the state’s rich heritage. From a historical gateway to a modern economic powerhouse, Johor’s journey reflects resilience and adaptation. Invest Johor places a strong emphasis on strategic infrastructure development, enhancing transportation networks, logistics hubs, and technology parks to attract businesses involved in cutting-edge industries.

    Facilitating collaboration between industries and creating specialized clusters is another strategy to enhance competitiveness. The idea is to build ecosystems where companies, research institutions, and startups can collaborate and benefit from each other’s expertise. To attract investments in disruptive technologies, Invest Johor, in collaboration with MIDA, offers targeted incentives for companies involved in sectors such as biotechnology, information technology, and advanced manufacturing. These incentives may include tax breaks, grants, and other financial incentives to encourage businesses to establish and expand their operations in Johor.

    Talent development and retention play a crucial role in sustaining Johor’s economic momentum. Invest Johor collaborates with Unit Modal Insan Negeri Johor to focus on developing and retaining a skilled workforce. This involves collaborating with educational institutions to ensure that the local workforce is equipped with the necessary skills for emerging industries. The establishment of training programs and partnerships with universities and vocational schools is part of this long-term vision.

    Digital transformation is recognized as a key driver for staying at the forefront of economic development. Invest Johor supports businesses in adopting digital transformation strategies, including e-commerce, Industry 4.0 technologies, and smart city initiatives. This commitment to embracing digital technologies aligns with the global trend towards Industry 4.0 and the increasing reliance on digital solutions across various sectors.

    Sustainable development is a core principle guiding Invest Johor’s initiatives. The organization actively promotes sustainable practices in industries such as renewable energy, eco-tourism, and green infrastructure development. This commitment aligns with the region’s dedication to responsible and future-oriented economic growth. The emphasis on sustainability reflects a global shift towards environmentally conscious practices and resonates with investors who prioritize Environmental, Social, and Governance (ESG) factors in their decision-making.

    Invest Johor’s efforts extend beyond economic growth to actively engaging with the younger generation and entrepreneurs. The emphasis on attracting young talent and fostering a thriving millennial ecosystem is seen as a critical component of Johor’s economic strategy. Concrete examples of successful initiatives and stories showcase how the state leverages the dynamism of the youth to fuel economic growth and innovation.

    The responsible investor of today prioritizes ESG factors, and Invest Johor recognizes this shift. The organization takes measures to ensure that development in Johor is sustainable and environmentally responsible. This includes prioritizing green infrastructure development, supporting renewable energy initiatives, and ensuring compliance with environmental regulations. The role of investors in contributing to a green and equitable future is highlighted, encouraging them to be part of the sustainability journey in Johor.

    Johor’s embrace of disruptive technologies like AI and biotech positions it as an attractive destination for global tech giants and innovative startups. The article highlights some of the most exciting tech-driven projects or initiatives that are drawing attention from the global tech community. It also provides insights into how investors can contribute to building Johor’s tech ecosystem and harness its potential for future growth.

    The human element is not overlooked in this economic narrative. Real-life success stories of local entrepreneurs and foreign investors who found their dreams and profits in Johor are shared. These stories serve to resonate with readers, offering tangible examples of the opportunities and support provided by Invest Johor. The inclusion of investors’ testimonial videos adds a personal touch to the narrative, bringing the success stories to life.

    Invest Johor’s commitment to “Building a Better Johor Together” emphasizes active engagement with local communities. The organization recognizes the importance of inclusive and equitable growth, and this involves understanding the unique needs, challenges, and aspirations of the local community. The article provides insights into how investors can actively engage with local communities, building partnerships, measuring, and reporting impact, seeking input and feedback, and committing to long-term collaboration.

    To differentiate itself from other regional investment hubs like Singapore or Vietnam, Invest Johor leverages specific strengths, advantages, and strategic initiatives. The strategic location and connectivity of Johor, particularly its proximity to Singapore, provide a significant advantage. The focus on enhancing transportation and logistics infrastructure enhances connectivity and facilitates the movement of goods and people. Cost-competitiveness is highlighted as a key proposition, with lower operational costs compared to Singapore being an attractive factor for investors.

    Invest Johor further distinguishes itself through the development of special economic zones and industrial parks with tailored incentives for specific industries. The organization promotes a diversified approach, highlighting specific industries or sectors where Johor has a competitive advantage or is experiencing rapid growth. The focus on innovation and technology, with the promotion of research and development centres, technology parks, and partnerships with tech-focused organizations, positions Johor as a forward-thinking investment destination.

    “Johor’s economic strength lies in its strategic location, cost-competitiveness, and a diversified approach to industries. We envision a future where Johor stands out as a hub for innovation, sustainability, and vibrant economic activity, contributing significantly to Malaysia’s overall growth.”

    Sustainable development and a commitment to ESG factors are emphasized as differentiators for Johor. The integration of sustainable practices, including green infrastructure, renewable energy initiatives, and compliance with environmental regulations, aligns with the global trend towards responsible business practices. The ease of doing business and a supportive regulatory environment, along with a skilled workforce and education initiatives, are additional factors that contribute to Johor’s appeal as an investment destination.

    Looking ahead, Invest Johor envisions bold and audacious possibilities for Johor’s economic landscape in the next 5-10 years. While predicting the future is inherently challenging, envisioning transformative trends involves considering visionary scenarios. These include the emergence of Johor as a global innovation hub, a sustainable smart city with green infrastructure, a biotech and healthcare hub, a pioneer in renewable energy, a digital transformation epicentre, a global logistics and trade hub, a cultural and creative economy hub, and an integrated sustainable tourism destination.

    To prepare for disruptions and unexpected developments, Invest Johor outlines strategic measures to ensure adaptability and resilience. These include scenario planning, diversification of industries, maintaining an agile policy framework, investment in education and skills, international collaboration, digital infrastructure resilience, community engagement, environmental stewardship, crisis preparedness and response, and regular stakeholder consultation.

    Invest Johor’s vision for the future is comprehensive, spanning a diverse range of industries and focusing on sustainability, innovation, and inclusivity. The organization’s strategic initiatives and collaborative approach position Johor as a dynamic and forward-thinking investment destination. As the state navigates the complexities of a changing global landscape, Invest Johor remains committed to building a better future for Johor and contributing significantly to Malaysia’s overall economic growth.

  • Malaysia’s dance with FAANG Giants

    In Malaysia’s bustling capital city of Kuala Lumpur, and other urban areas across the country, anticipation surrounds discussions about the global tech phenomenon known as FAANG [Facebook (now Meta Platforms), Amazon, Apple, Netflix, Google [now Alphabet]).Entrepreneurs, industry experts, and policymakers are engaged in conversations about the implications of welcoming these giants onto the nation’s digital landscape. With its rapidly growing tech-savvy population, Malaysia is at crossroads that could redefine its economic trajectory and cultural identity.

    THE FAANG INVASION Facebook’s (Meta Platforms) Impact:
    With a population exceeding 32 million and a steadily growing middle class, Malaysia holds promise as an attractive market for FAANG companies. The allure of Meta Platforms’ social connectivity has already drawn over 25 million monthly active Facebook users in the country, showcasing the extent to which the platform is embedded in the fabric of Malaysian society. Under the Meta Platforms umbrella also includes Instagram and WhatsApp – all of which are widely used as modes of communication in this country. Friends, families and communities are also using these platforms as tools for information sharing and social engagement, ultimately transcending geographical boundaries.

    Apple’s Tech Status Symbol:
    Apple’s reputation for innovation and product quality has positioned itself as a status symbol among
    Malaysians. The growing popularity of iPhones, iPads, and MacBooks is indicative of a broader technological shift. Young professionals, entrepreneurs, and students are adopting these devices as essential tools for communication, productivity, and entertainment, sparking a transformation in how Malaysiansinteract with technology.

    Amazon’s Retail Revolution:
    Amazon’s global e-commerce dominance has the potential to revolutionise Malaysia’s retail landscape. As traditional brickand-mortar stores face disruptions, the prospect of tapping into Amazon’s extensive product range and streamlined delivery services piques the interest of local businesses. The ease of reaching a wider customer base and venturing into international markets fuels ambitions for growth, though concerns linger about the impact on local retailers and traditional markets.

    Netflix’s Cultural Reshaping:
    Netflix’s streaming platform has caused a seismic shift in Malaysia’s entertainment consumption habits. Its library of diverse international and local content caters to the varying tastes and preferences of Malaysians. The surge in subscribers demonstrates a growing appetite for high-quality entertainment on demand. As local filmmakers and content creators find their work on this global platform, cultural narratives are reaching wider audiences, reshaping perceptions of Malaysia’s creative industries.

    Google’s (Alphabet) Information Gateway:
    Google (under the parent company Alphabet), the search engine giant, has woven itself into the fabric of Malaysians’ daily lives. With over 30 million Google searches conducted daily, the platform becomes a virtual gateway to information, education, and research. From students seeking academic resources to entrepreneurs researching market trends, Google’s impact on knowledge dissemination is undeniable.

    THE COMPLEX BALANCING ACT
    As discussions buzz with excitement about the potential benefits, cautionary voices also emerge. The concentration of power within a few tech giants raises concerns about stifled competition and limited innovation. The delicate balance between global technological influence and the preservation of Malaysia’s cultural identity is at the forefront of many minds. Data privacy and security emerge as paramount concerns as Malaysians integrate FAANG services into their daily lives. The digitisation of personal information has implications for individual privacy, warranting a closer examination of data protection frameworks and regulations. As the convenience of seamless connectivity collides with the necessity of safeguarding sensitive information, policymakers grapple with the imperative of ensuring citizens’ digital rights.

    Hann Liew, Founder & CEO of Halogen Capital

    Amid these considerations, experts and industry leaders begin contemplating a harmonious coexistence between FAANG companies and local innovation. The narrative shifts from fearing dominance to exploring collaboration. Initiatives are proposed to bridge the gap between tech giants and local startups, aiming to provide resources, mentorship, and funding to nurture homegrown talents. These efforts envision a scenario in which Malaysia can leverage FAANG’s global influence while preserving
    its distinctive cultural heritage. “Perhaps the phrase FAANG will resonate most with Malaysia’s savvy investment community, where both long term (10 years, 25% annualised return) and shorter term (35% return in the past year) equity investors have enjoyed outsized returns from their investment portfolios in these five stocks,” explains Hann Liew, founder and CEO of Halogen Capital, Malaysia’s first fund manager licensed to manage cryptoassets.

    He further emphasised that how investors will navigate these (now) mega stocks as part of their portfolios going forward will be determined by how they will dance with local governments by way of
    censorship and how they respond to the next wave of technologies and business models (artificial intelligence, blockchain, IoT etc).

    EDUCATIONAL PREPAREDNESS
    The tech landscape in Malaysia is undergoing a transformation, driven by the potential of FAANG’s presence. The narrative of collaboration between these global tech giants and local startups is gaining momentum. As policymakers seek to strike the right balance, questions arise about the role of education in preparing the workforce for this digital era. Academia and vocational training are seen as critical to equipping Malaysians with the skills necessary to thrive in an environment increasingly defined by technology.

    Furthermore, the impact of FAANG’s presence extends beyond economics and culture. It reverberates within the realm of policymaking, where debates center on fostering innovation and ensuring regulatory frameworks adapt to the digital age. The government’s role in supporting homegrown start-ups, incentivising entrepreneurship, and creating an environment conducive to technology-based innovation is being scrutinised and reshaped.

    Sajesh Kumar Paramasivam, Senior Partner of TorchBearer Consulting

    AN EVOLVING NARRATIVE
    As the journey of Malaysia into the realm of FAANG continues, the nation is writing a new chapter in its history. The ongoing discourse reflects a dynamic exchange between global technological influence and the preservation of Malaysia’s unique identity. As Malaysians navigate the potential and challenges presented by the presence of FAANG, they demonstrate their adaptability and resilience in an increasingly interconnected world.

    “It’s amazing to observe how quickly FAANG companies have incorporated into our daily lives, providing Malaysians, especially newcomers and those without significant income and investment experience, with
    enormous investment opportunity. You don’t need a large sum of money to invest; you can buy fractional shares of these titans. Consider it as acquiring a portion of these technological behemoths,” says Sajesh Kumar Paramasivam, senior partner at TorchBearer Consulting, a wealth management company specialising in family wealth building.

    A REAL-TIME STORY
    The story of Malaysia and FAANG is not a mere work of fiction but an evolving narrative, influenced by real-time decisions, aspirations, and creativity. At the end of 2022, Facebook’s user base has grown to over 26 million monthly active users, further embedding its impact on society. Amazon’s market share in e-commerce has surged, reshaping local retail dynamics. Netflix’s Malaysian subscriber base has expanded, elevating Malaysian creative content on a global stage. Apple continues to inspire technological aspirations, and Google remains Malaysians’ trusted source of information.

    Malaysia’s journey stands as a testament to the nation’s pursuit of progress while honouring its rich heritage. The evolving partnership with FAANG companies showcases the nation’s ability to navigate the complexities of the digital era while preserving its cultural roots.

  • ICMR Research Series: Taking a Dual and Systematic Approach to Address Investor Vulnerability in Malaysia

    Before the COVID-19 pandemic, Malaysia was already faced with multiple complex challenges – from the impacts of climate change, and ageing populations, to rising inequalities. The pandemic has only accelerated these challenges and to a large extent, also exacerbated vulnerabilities affecting households and individuals’ levels of financial resilience.

    Given these challenges facing investors today, the burden of financial well-being is too heavy to rest solely on individuals themselves. To move forward beyond the present crisis, responsible finance will require that all stakeholders – government, policymakers, the financial industry, and more – treat individuals’ financial well-being as a shared responsibility.

    Building Financial Resilience

    Firstly, there is a need to build financial resilience across the population. As we explored previously in our series, a lack of financial resilience cuts across all drivers of vulnerability – predominantly linked to poor investment and saving behaviours, as well as an equally important factor when dealing with issues which are out of one’s control, such as unexpected life situations and industry-related issues.

    It is crucial to acknowledge that some individual barriers faced by certain segments of the population to be able to save or invest, involve embedded structural challenges that cannot be solved purely by market-based solutions. These include sluggish wage growth, unemployment especially for youths, mismatches between labour demand and supply, the rise of the gig economy and lack of social safety nets.

    Thus, a whole-of-nation approach which goes beyond the jurisdiction of any single regulator or an agency may be needed for holistic reforms that address both structural and individual barriers. Policymakers and regulators will need to focus their efforts on assisting vulnerable populations to become more financially resilient, such that they are better able to use market opportunities to save and invest.

    Since investor vulnerability is multifaceted, driven by various factors such as personal and financial circumstances, age, geographical location, and investment experience – policy actions need to take a tiered and nuanced approach. This includes a review of incentive structures complemented with behavioural nudges that can help shape and sustain the necessary savings and investment behaviours.

    Nudges are part of a wider toolbox in the behavioural sciences consisting of education and training, subsidies and taxes enable or restriction, and environmental restructuring (physical or social context) which specifically focuses on leveraging behavioural levers to guide people towards making decisions that benefit them the most in the long term, without significantly changing their present incentives.

    Examples of ‘nudge’ initiatives include behavioural interventions like “save more tomorrow” and “sidecar savings”, which encourage saving for retirement in easy, convenient, and painless ways, as well as micro-investing applications that help build an investment habit by investing in smaller amounts of money like the spare change from daily purchases.

    Raiz Malaysia for example is an automated investment service that rounds up each transaction from a user’s Debit Card to the nearest Ringgit and invests the change into a unit trust portfolio based on their financial situation and goals

    (Source: Raiz Malaysia)

    Dealing with vulnerable investors

    Secondly, the building of financial resilience must then be complemented with a targeted approach to improve the protection of vulnerable investors. ICMR’s study identified key trigger points that indicate vulnerability such as discretionary income and perceived financial status, health status, level of retirement savings, level of financial literacy, investment experience and encounters with scams.

    To identify if a possible investor could be vulnerable, the current Know-Your-Client (KYC) process could be further enhanced with the introduction of these trigger points into the process. Also, this assessment should be done on a more regular basis, preferably every 6 to 12 months, as one’s situation is not static and needs to be recalibrated accordingly.

    Emphasis needs to be placed on market intermediaries and agencies to better identify and manage vulnerable investors. Regulators then need to focus on the “duty of care” by providing guidance and overseeing the conduct of capital market intermediaries, including fair treatment of vulnerable customers coupled with investor protection measures.

    Most regulators have general guidelines for financial services that already require service providers to consider factors such as knowledge, experience, financial situation, and risk profile of the individual investor during service provision. At the same time, targeted programmes are being implemented in many jurisdictions to specifically protect certain vulnerable groups, like senior investors.

    In Malaysia, financial regulators have certainly been vocal on issues affecting investors such as unlicensed activities and scams, retirement inadequacy, as well as the inclusiveness of capital markets for retail investors. Given the prevalence of challenges facing today’s investors, considering how investor vulnerability may affect these outcomes would be beneficial for future policy and research.

    In line with this, the Securities Commission Malaysia (SC) launched the third Capital Market Masterplan (CMP3) in 2021, which identified “enhancing focus on protecting investors against vulnerabilities” as a strategic consideration, with the “identification and assessment of vulnerable investors” being one of the priorities over the next five years, as illustrated in the diagram below.

    Source: Securities Commission Malaysia (SC)

    Collaborative and behavioural insights for effective implementation

    Creating policies and initiatives alone may not be enough to address the rising issues of vulnerability. To ensure the effective implementation of these initiatives, financial vulnerability must be viewed across the value chain. Our report highlights that vulnerability drivers are a combination of behavioural and structural issues that fall and cut across the purview and jurisdictions of multiple agencies.

    Behavioural insights should be incorporated into every stage of a policy cycle, from development to all the way to post-implementation. While this may require embedding more rigorous evidence-based approaches to design and evaluation such as Randomised Control Trials (RCTs) into the policy cycle, it could eventually reduce the need for corrective measures once a policy is at the implementation stage.

    RCT is a trial in which subjects are randomly assigned to either a treatment group or a control group. The treatment group receives the intervention being studied, while the control group receives either no intervention or a placebo. The effects of an intervention or treatment are measured by comparing outcomes between the groups.

    Policymakers can also leverage this understanding to evaluate the effectiveness of policy implementation and make necessary adjustments. Behavioural insights can also help uncover unintended consequences or knock-on effects of certain policies, which regulators may not have been measuring or looking out for in the first place.

    Given the delicate environment and crossroads of change, there is a dire need for policymakers to take proactive steps now while we still have the policy space to make reforms and improvements for the long term. With more collaboration with industry stakeholders, policymakers can create a resilient financial ecosystem that safeguards the interests of the most vulnerable investors.

    This article is part of a content series by the Institute for Capital Market Research (ICMR). Follow ICMR’s Facebook page to stay updated on behavioural tips and insights for better investing habits. To learn more about ICMR’s research on new-age vulnerabilities, visit www.icmr.my or download the full report.