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Thursday, March 31, 2022

Financial literacy and technology are key factors, will attract young investors

 

 Building LONG TERM WEALTH with Stocks & Avoid FAKE GURUS | FIRL Podcast 36

Ng Zhu Hann of Tradeview.my shares his journey from London School of Economics, to becoming a long term stock investor and the author of Once Upon a Time Bursa. He passionately writes on his blog, Tradeview.my to educate retail investors on investing and to avoid fake gurus. He also mentions that retail investor participation is at all all time high in 2020. However, he makes the most wealth during the bear market and says dividend yields, earnings and cash flow are time tested theorem that generate wealth and not short term goals.

 

More effort needed to educate the young investing

With thousands of new and young retail investors participating in the local bourse in the last two years, more effort is needed from capital market regulators and the private sector to improve financial literacy, particularly among the youth, say market observers.
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Ng Zhu Hann, who is the CEO of Tradeview Capital and author of “Once Upon A Time In Bursa”, told StarBiz that brokerages and investment banks could not afford to neglect providing first-time retail investors with “the tools to understand the stock market”.
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“Once you lose money, or whatever savings that you have, you would never return to participate in the stock market because you may think the market is rigged against you. That is human nature,” he said.
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According to the Securities Commission’s (SC) annual report 2021 , an investor survey focused on the youth found that only 3% of youths have a high-risk appetite regarding the level of risk they were willing to take for investments.

“This may suggest that risk aversion has set in due to the pandemic,” said the SC survey.
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The Nielsen Company (M) Sdn Bhd was commissioned by the SC to conduct the survey on its behalf.
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However, on capital market products and their associated risks, the survey showed that respondents viewed investments in Amanah Saham Bumiputera (ASB) as low-risk.
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“In comparison, 70% of the respondents perceived stocks and shares to be high-risk. Overall observations suggested that respondents perceived the capital market products as high-risk and this perception was consistent across the demographic profiles,” said the SC survey.
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Ng also noted that according to Bursa Malaysia, following a similar trend in 2020, 63% or about two-thirds of the new 223,249 individual central depository system accounts opened in 2021 were by millennial investors (aged 26 to 45 years of age).
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He pointed out that many of the new millennial investors had lost money when they got caught up in the penny stock or glove stock mania in the last two years.
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“They had no prior investing experience, and lost money, and that becomes a problem. That is why more should be done in terms of investor education,” said Ng.
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Meanwhile, Rakuten Trade head of equity sales Vincent Lau noted that the regulators of the Malaysian capital markets have made many efforts to educate retail investors, in an era where investing via new and innovative digital platforms is the norm.
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“Online resources like Bursa Marketplace have been very crucial in educating new retail investors, which increased tremendously in numbers during the pandemic-related lockdowns in the last two years,” he said.
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Lau also pointed out that with the younger generation pivoting towards buying, selling and storing crypto currencies, Malaysian regulators have been staying in tune with the demands of the digital era with the approval of crypto currency platforms like MX Global, Tokenize and Luno.
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“Digital banks are also coming, and new fintech will enable and attract the younger generation to explore various investment options,” he said.
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Lau pointed out that Rakuten Trade, as an online stock trading platform, has been actively holding corporate and investment webinars.
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Ng said it was not surprising that the youth would view investments in ASB and fixed deposits as low-risk, compared with equities. 

 “If you invest in equities by yourself, without the proper understanding and knowledge, it is just like gambling, right? But I think that equities in fact, is not the most high risk asset class. 

I am seeing a very unhealthy trend of youngsters, who have never even invested in equities in their life, actually jumping into crypto currencies,” he said.
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The SC’s annual report also said RM21bil in investment in digital assets are across all registered digital asset exchanges (DAX) in 2021.
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Digital asset accounts jumped 300% to 760,000 in 2021 (from 190,000 in 2020).
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About 62% of investors in crypto currencies on the DAXs are below the age of 35, according to the SC as at end-2021.
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The regulator also observed that last year, non-fungible tokens (NFTs) became a hot trend among artists and collectors.
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Ng pointed out that unlike crypto currencies which are not regulated, there is a lot of regulation, oversight and transparency when it comes to investing in equities.
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“Compared with less developed markets, I believe Bursa ranked among the best, along with Singapore Exchange and the Hong Kong Stock Exchange, in terms of the regulators,” said Ng.
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In the SC’s annual report, the survey also showed that investment decisions of the youth were not based on fundamentals, but mainly driven by socio-economic status, family, friends, influencers as well their perceptions of the products and brands.
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It also revealed that there was also familiarity bias among the respondents, choosing to invest in products that they were already familiar with.
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Ng said while there was plenty of information available on company websites and annual reports, first-time investors may not know how to decipher or dissect the data.
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“They would go for financial investment talks and hope that the guru would teach them, which is very dangerous. The problem is there are many fake gurus today in the market, who just want to make money, and they are not even licenced,” he said.
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Ng suggested regulators could allocate more resources in disseminating financial information via social media, and also working with professional or non-profit organisations to improve financial literacy among the youth.
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“Under the Continuing Professional Development (CPD) framework, perhaps a revision can be done where CPD points can be earned by contributing pro bono, or helping society in terms of improving financial literacy,” he said.

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Securities Commission’s (SC) annual report 2021: SCAMMERS ON THE LOOSE

 

 

Opening Keynote Address by Datuk Syed Zaid Albar, Chairman SC Malaysia at ESG Corporate Summit.

Scams have been increasing in the Malaysian capital market over the past few years, amid the Securities Commission’s (SC) efforts to clamp down on unscrupulous activities.
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Chairman Datuk Syed Zaid Albar said that complaints on unlicensed schemes in 2021 had increased to 52% of total complaints received by the SC, up from 37% in 2020.
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“In line with this, we have also stepped up our anti-scam efforts using a multi-pronged approach,” he said.
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Syed Zaid was speaking during a virtual media briefing yesterday, following the launch of the SC’s annual report for 2021.
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Actions taken by the SC in 2021 against unlicensed activities and unauthorised operators included issuing 24 cease and desist orders to persons carrying on unlicensed investment advice, 13 administrative sanctions via reprimands and directives, and blocking access to 143 websites via the Malaysian Communications and Multimedia Commission (MCMC).
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To date, the SC has undertaken five enforcement actions, 473 regulatory interventions and put up 275 unlicensed companies and individuals on the SC’s Investor Alert List.
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An internal taskforce was also established to investigate investment scams and clone firms which reviewed 159 bank accounts that identified 32 persons of interest.
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In 2021, the SC concluded 22 investigations, and more than 55% of completed investigations last year relate to unlicensed activity and securities fraud.
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Corporate misconduct, which constituted 14% of the total completed investigations, included disclosure breaches relating to securities laws.
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As of Dec 31, 2021, the total number of active investigations were 46.
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“While the SC continued to dedicate substantial resources to conduct investigations relating to securities fraud and market manipulation offences, investigations on corporate misconduct has emerged as the second highest percentage of active investigations carried out in 2021,” the commission said in the annual report.
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Through its civil enforcement actions, the SC had in 2021 restituted RM2.7mil to a total of 721 investors who had suffered losses as a result of such breaches.
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On a separate matter, Syed Zaid said that the SC was monitoring the issuance of non-fungible tokens (NFTs) on a case-by-case basis, amid the global craze to convert real-world items into digital assets.
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This was, however, subject to the nature of the NFTs, the NFT projects as well as the activities carried out at the NFT marketplace, he added.
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An NFT is a unique digital asset that represents ownership of real-world items like photos, videos and audios. It is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger, that can be sold and traded.
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Syed Zaid pointed out that the underlying assets of most NFTs in Malaysia were non-securities products, hence such NFTs did not fall under the SC’s regulations.
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However, SC managing director Foo Lee Mei said that some NFTs may come under the SC’s purview, if the NFTs met the SC’s digital asset prescription order.
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In addition, in the event any of the NFT players engaged in capital market-regulated activities, the issued NFTs would have to adhere to the SC’s rules.

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Based on the SC’s latest annual report, Malaysia’s digital asset market continued to expand in 2021 despite the market uncertainties, with approximately RM21bil in digital assets traded across all registered digital asset exchanges (DAXs).
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The total number of investment accounts surged by nearly 300% to about 760,000 from more than 190,000 in 2020. Since introducing the DAX framework in 2019, the SC had registered four DAXs, namely Luno Malaysia Sdn Bhd, SINEGY Technologies (M) Sdn Bhd, Tokenize Technology (M) Sdn Bhd and MX Global Sdn Bhd.
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Commenting on the Malaysian capital market outlook for 2022, Syed Zaid said volatility will remain, especially in the near term.
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The outlook, he added, will be premised on the baseline expectation of a sustained economic recovery this year.
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However, he warned that further escalation of the Russia-Ukraine conflict could disrupt the much-need economic recovery.
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“As we have witnessed, the impacts are already felt in various market segments worldwide, especially in commodities. “The possibility of a more severe impact still remains, given the potential for further escalation and the lack of a clear resolution.
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“For the moment, the direct impact to Malaysia is still manageable, given our minimal exposure to Ukraine and Russia,” he said.
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Challenges aside, Syed Zaid said the SC’s priorities in 2022 aim to shift the capital market to a relevant, efficient, diversified and inclusive ecosystem.
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This would allow Malaysia’s national growth pillars to achieve its ambitions in areas such as digital, carbon-neutrality and managing the transition of the country into an aged nation.
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“From an organisation perspective, the SC will strengthen its internal digital capabilities and skills set to enable the SC’s workforce to harness state-of-the art digital technology for deeper insights and engender efficiency in our risk management, surveillance and supervision functions.
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“The SC has also embarked on its own journey towards reducing its carbon and environmental footprint, in line with Malaysia’s goal of becoming a carbon-neutral country by 2050,” he said.
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On expected fundraising activities, Syed Zaid painted a positive outlook, underpinned by normalising economic conditions.
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For 2022, he expects about 35 initial public offerings (IPOs) to take place.
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In comparison, there were 29 new listings in 2021, of which six were on the Main Market, 11 were the ACE Market, and the remaining 12 were the LEAP Market. The total amount of funds raised from these new listings was approximately RM2.3bil.
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The SC noted in its annual report that it had also considered an IPO application on the Main Market last year, which would have raised about RM4.7bil. However, the application was subsequently withdrawn.
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“We have also received enquiries and statements of interest in SPACs (special purpose acquisition companies), but it is still too early to tell whether any SPACs will be listed in 2022,” he added.


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Financial literacy and technology are key factors, will attract young investors

 

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Sunday, March 27, 2022

Talent, wage growth and Koi’s law

Scholarship Programme – Great Eastern Life

http://my.gelife.co/scholarship
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SOCIAL media has been abuzz on the new minimum wage policy of RM1,500 announced by the government, which is slated to come into effect on May 1.
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For politicians, regardless of which camp one belongs to, there appears to be a consensus towards this policy’s implementation. It is after all a populist policy, hence to voice out vocally against it would be a public relations nightmare.
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Supporters for higher minimum wages can be seen to be largely employees and advocates of labour welfare.
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The key proponents against the new minimum wage policy was on the other hand largely from the business associations, manufacturers and small medium enterprise owners. In short, the employers.
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What is rather interesting from my observation is the high octane emotions expressed on social media, be it those for or against. Supporters of the new wage policy were completely aghast when proponents against it provided justifications to delay the implementation. Many resorted to name calling, where some were branded as capitalists, profiteers or bourgeoisie.
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There was even a viral social media posting on twitter with Tan Sri Soh Thian Lai’s remuneration as chairman of YKGI Holdings Bhd shared to depict the wealth disparity. He was in my view, unfairly targeted simply because he voiced out the views of the members within The Federation of Malaysian Manufacturers (FMM) in his capacity as the president of the association. Somehow, no reasons given were deemed acceptable by advocates of higher minimum wage.
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Low wage growth in Malaysia
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It is important to note that Malaysia has been caught in the middle income trap for the longest time. When former Prime Minister Tun Dr Mahathir conceptualised “Vision 2020”, it was our countries’ aspiration to achieve a high income nation status.
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Of course, the year 2020 came and left with my memory of it largely being watershed, much less anything remotely related to high income. So, the crux of our economy indeed has always been low wage and especially painful wage growth in the last decade.
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We need not look far, the past five years' statistics of our country’s mean and median monthly wages is sufficient to show a rather demoralising trend as per the attached chart. World Bank’s definition of a high-income nation for 2020 was a gross national income (GNI) per capita of US$12,696 (RM 53,532). Our country’s GNI last year stood at US$10,111 (RM42,503), which was an estimated 20% below the minimum threshold of the World Bank. While 20% apart may not seem like the Grand Canyon, however, we must understand there is a disparity of wealth gap between the high T20 and the B40. This is further exacerbated by the pandemic and slump in the economy for the past two years.
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As a former employee who worked for various corporate organisations, I can deeply sympathise with the predicament of entry-level and low-income employees.
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With access to remuneration information of the company, I notice the large income and employee benefits disparity between the senior management and the junior workers.
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There was once during a town hall meeting with senior leaders of the management, I raised a question anonymously, “How is it equitable that the more senior one is along the corporate hierarchy, apart from higher salary, one still gets much better employee benefits such as mobile, healthcare, petrol and others allowances, when in fact, it is the more junior employees with low income that are desperately in need of better benefits to supplement the income gap?” The human resource head of the company skipped my question.
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Is minimum wage the solution?
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On Jan 1, 2020, the minimum wage of RM1,200 came into force. This was right before the country was hit by the pandemic. Two and a half years later, in spite of the pandemic and series of lockdowns decimating many small-medium enterprises and businesses, the minimum wage would soon be raised to RM1,500. With a history of being vocal about employees’ welfare throughout my corporate tenure, I cannot help but feel that the situation at this point in time is not conducive for such a drastic jump.
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Although we did see a recovery of Malaysia’s gross domestic product performance in 2021 with a 3.1% increase compared to a contraction of 5.6% in 2020, it is necessary to understand that many businesses went out of business and the unemployment rate has increased significantly.
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In addition, the country’s borders, which is allowed to open on April 1 may provide a fresh catalyst for the economy recovery, the impact has yet to be felt by businesses as a whole. If 2022 is to be a recovery year, then business friendly policies need to supersede populist policies in the near term in order to provide some breathing room to recoup past losses.
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Furthermore, increasing business costs will add to the worsening domestic inflationary pressure resulting from global factors such as geopolitical tensions, supply chain disruption and loose monetary policies. Increasing cost without expanding the economy pool is simply discouraging reinvestment by the business enterprise, which is crucial towards growing the country’s economy. The multiplier effect of investment activity outweighs the effects of consumer spending. This is economy 101.
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Koi’s Law
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In season two of Dr Romantic, a popular Korean drama, a scene specifically mentioned an interesting theory known as ’Koi’s Law’.
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This theory provides that a Koi fish (which is a type of carp), grows in size subject to its environment. If you put it in a fish bowl, the Koi would be small fitting to the size of the fish bowl. If you put it in the pond, the Koi would grow much larger. This relates to people’s ability to change proportionally to the environment. If we give people the opportunity to grow, they will be able to expand on their respective ability. Wage is an important factor in determining such an outcome.
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Therefore, I do agree that wage growth should be commensurate with talent in order to retain the best minds which are crucial towards nation building. By having the best talent in the respective fields, our country would advance and naturally, this would help to further improve the quality of lives of the people.
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It is a cycle. I definitely do not disagree with reviewing and raising the minimum wage but it ought to be gradual and at a pace where the business owners and employers are given the equal opportunity to recover from damages suffered. Populist agendas should never have a place in formulating economic policies otherwise long term advantages will always take a backseat to short term gains.
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NG ZHU HANN By Ng Zhu Hann, the CEO of Tradeview Capital. He is also a lawyer and the author of “Once Upon A Time In Bursa”.The views expressed here are the writer’s own. 

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