SCxSC Fintech Conference 2018 Highlights

SCxSC Fintech Conference 2018 (SCxSC 2018) is Securities Commission Malaysia's annual fintech event, an interactive platform for discussions and exploration of new and evolving digital trends.  The focus of SCxSC 2018 is on the underlying technologies powering Fintech products and services in the capital market – in line with the theme "Embracing Technology".

During the opening speech, Minister of Finance YB Lim Guan Eng, shared details regarding the recently announced co-investment fund (CIF) for equity crowdfunding (ECF) and peer-to-peer (P2P) financing. The CIF is part of the government’s initiative to enhance access to financing for the micro, small, and medium enterprises (MSMEs), which traditionally face challenges in obtaining financing to catalyse their growth.

Meanwhile, SC Chairman Datuk Syed Zaid Albar highlighted that alternative market-based financing initiatives, namely ECF and P2P, continued to show strong progress. To date, the 13 ECF and P2P registered platforms have collectively raised more than RM200 million for nearly 500 MSMEs. To scale up this segment, the SC is assessing new applicants for both ECF and P2P platforms, and is expected to make an announcement in the first half of 2019.

Additionally, the SC has received strong interest from new and existing capital market players to offer automated discretionary portfolio management services under the Digital Investment Management (DIM) framework. While the first DIM licence was awarded in mid-October, Syed Zaid shared that the regulator has yesterday granted another approval-in-principle, with more applications currently under assessment.

The SC also unveiled details of Project Castor (www.castor.my) with the accompanying industry blueprint entitled “Capital Market Architecture Blueprint in a Decentralised World”, which explored the technical implementation and feasibility of using Distributed Ledger Technology as the underlying market infrastructure for unlisted and over-the-counter (OTC) markets.

Jobs that Will Disappear by 2030

With technology moving at a fast pace, every facet of our lives is now linked to a microchip.  A recent study by the Foundation for Young Australians found that nearly 60% of young people are training for careers that will be largely automated in next 10 to 15 years.  So what are those careers that are likely to disappear:

1. Travel Agents – websites and self-arrangements are already replacing sales reps for travel;
2. Cashiers – a less cash society and advances in contactless payments including crypto and ApplePay will reduce requirements for people to handle payments.  Self-service tills and stations are in place in many supermarkets and restaurants; 
3. Librarians – digital and e-libraries have replaced libraries of old and hence librarians;
4. Postal Couriers – less requirement unless it is parcels and even those could be delivered by drones;
5. Bank Tellers – with e-banking, and convenience of home or office, it is less necessary to be at a branch.  They may need to be retrained as corporate financial advisors/ experts;
6. Textile and Motor Vehicle Workers – machines are already replacing them.  Unskilled workers have less and less opportunities;
7. Printers – millennials (and others) are more into on-line versions.  The age of print newspapers may come to an end;
8. Referees/ Umpires – VAR and other technology will replace the traditional referees and umpires for games;
9. Pilots – automation and auto-piloted flight will replace pilots and flight crew.  An age of “I, Robot”;
10. Grab/ Uber/ Taxi Drivers – driverless cars are about to be introduced which means we don’t need to learn driving anymore.  Driving schools may close, service centres may reduce and it is the age where cars and electronics garages determine direction, service and replacements;
11. Lumberjacks – with digital technology, there is less paper requirements, lumberjacks and timber companies are endangered species;
12. Telemarketers – these annoying people will go but you may have to automated sales calls, that is even more disturbing!
13. Fishermen – research is underway into fishing “bots” that can do the job of humans;
14. Farmers – fully automated machines will increase productivity and reduce number of foreign, unskilled workers in this sector; and
15. Construction Workers – robotic technologies will replace building methods and labour force used.  It will be less dusty, less noisy with less union, safety and other social issues.

So What Should I Do Instead?

A willingness to change career is an important attribute.  Pursue a career in the creative sphere including new machines, AI and so forth; relationship-based jobs like medical professionals or financial advisors; unpredictable jobs – emergency services; security-related cyber warfare jobs; and, jobs in the renewable energy sector.

Good luck!

This Photo by Unknown Author is licensed under CC BY-SA

Are Robo-Advisers on the Rise in Asia?

Robots have been on the rise, as if the movie “I, Robot” made in 2004 is coming alive. Then there is the robo-advice services. Independent robo-advisers have been around in the U.S. for some time. For example, Betterment managed over USD1.7 billion in client assets.

Algorithms are the base for robo-advisers that build exchange-traded funds to meet varying risk appetites of investors. These platforms charge low fees in a low yield environment.

Charles Schwab, in the U.S., marketed robo-advising with its intelligent Portfolios in 2015. There is no advisory or account service fees or commissions, what a boon for investors! Many banks in Asia make good profits from promoting funds to retail investors. It is only a matter of time before robo-advisers cannibalise them.

So it is good for banks to develop or tie-up with existing operators. Independent robo-advisers need customers while banks usually are ponderous in developing technology or adopting new initiatives.

Alibaba and Tencent will play a bigger role in financial advice. And they could easily become the new “super” banks!

Reference:

Why Robo-Advisers Are On The Rise in Asia, Larry Cao, CFA, Fintech 2018 Report, CFA Institute

This Photo by Unknown Author is licensed under CC BY-ND

PTPTN’s Conundrum – Continue or Whither Away?

As at 31 December 2015, PTPTN approved more than RM55 billion in loans to approximately 2.5 million students.  Amount disbursed stands at RM45.2 billion while amount repaid is RM7.3 billion.

The enrolment on a yearly basis, private tertiary institutions will increase to 1.6 million students by 2025.  And the cumulative loans is projected to rise to RM141.5 billion by 2025.  On current loan recovery trend, PTPTN is not likely to sustain its business.

Possible ways to defuse PTPTN “bomb” is to adopt some of Penang Institute’s recommendations:

·        reduce waivers for 1^st class honours;

·        remove discounts;

·        automatic deduction at source (with a monthly salary of above RM3,500).

For new applicants, return student loan applications to the private sector, either through banks or a new SPV for the purpose.  Could also consider P2P or such similar arrangement?

PTPTN’s existing loans need to be restructured into a “good” bank and a “bad” bank principle.  The “bad” bank is sold to the private sector to recover.  So what is PTPTN’s future?  Existing PTPTN is transformed and all new loans are driven through a new private sector entity not connected to any college.

Hot Deals for Monday WW49'2018

Welcome to Hot Deals for Monday, where you have opportunities to Buy or Sell!

Opportunity 1

Marketing and retail footwear looking for new investors to acquire 20% stake in company.  Consistent dividends of 5% or more for over 5 years.

Opportunity 2

Company dealing in outdoor and gym equipment, has been in business for 15 years.  NTA around RM7.5 mil.  Profit ranging from RM0.5 mil – RM1.0 mil.  Profit guarantee is feasible.  Offering price RM5.0 mil.

Opportunity 3

“Edupreneurship” opportunity!  An established education provider is offering an exceptional opportunity to grow entrepreneurs in higher education field.  The potential “edupreneur” will be given the chance to manage a college by taking a minor equity position (40%) in the education group for RM2.0 mil, with an option to buy-out the company later.

Opportunity 4

A European company is looking to acquire or JV with beverages company (including water or milk players) in Malaysia, Myanmar or China.

Opportunity 5

Sale of Software & IT business with revenues of over RM100 million and net income in the range of RM1.5 - 2.0 million.  Controlling stake (approx. 70%) is available.

Opportunity 6

Buyer looking for power plant (100MW and above) in Malaysia, Myanmar, Laos, Vietnam, Indonesia, Philippines and Bangladesh.

If you are interested in the above opportunities or would like to offer your hot deals, please contact info@mpcap.com.my or 603 - 2283 1170 for further details!

Brent Crude Oil Technical Chart

After a two-year rally from 2016, the Brent crude oil is on a losing streak since beginning of October 2018 (Chart 1).  It has plunged about 30% from USD86 per barrel to USD59 per barrel (26 Nov 2018).  What sparked the sell-off?

From technical chart perspective, the MACD divergence was observed since June 2018 (Chart 2).  It formed the deadly cross on 22 Oct 2018 and triggered the sell-off confirmation signal (see pink arrow).  At the range of USD55 to USD60, it may find a breather as there are few support lines.  If the price could not hold up well at this range, further downside may be foreseen in near term.

Chart 1. Brent Crude Oil Weekly Chart 2007 - 2018

Chart 2. Brent Crude Oil Weekly Chart 2013 - 2018

Fintech in Banking

Artificial Intelligence (“AI”) had a significant impact on the banking sector in 2017. There is basic AI and industry AI. Basic AI is integrated into application systems such as facial or speech recognition. Industry AI has application in anti-fraud, robo-advice and so forth. Currently, mainstream AI technology is data driven machine intelligence. Application of AI can be divided into three phases:

Application of Artificial Intelligence

The first stage is business automation – replace repetitive work with AI. Big data intelligence is the next stage. The third stage is to fulfil all-channel intelligent decision making and updating optimization through customer response.

In recent years, big data has been widely used in several areas of banking. Progressing from data analysis reports to data mining models to data products. Customer and product profiles provide continuous input to modelling process. As a result, there is improved customer perception, more intelligent algorithms and faster decision support. Banks can only develop a global perspective by building their foundation on big data.

Reference:

The Future of Fintech in Banking, Tian Jiang, CFA, Fintech 2018 Report, CFA Institute