Friday, 3 April 2020

e-Tunai Rakyat: Cashless Society is Not as Good as You Think

The RM30 e-credit given by the previous Government to Malaysians above 17 years old who earn less than RM100,000 annually has ended. This was to encourage public’s adoption of digital payment. With e-wallets, transactions will become more effective and efficient. People may be willing to spend more and hence boost the country’s economy. But is cashless really that good?

The Dangers of a Cashless Society:

1. Security

Cash payments work anywhere but digital payments rely on operating power networks, and supporting systems. A cashless world is entirely vulnerable to cyber-attacks and system breakdowns, with no emergency back-up plans. Sweden, for instance, experienced a computer crash during a “cashless festival” and, with none of the guests having cash, the entire event was bungled.

2. Privacy

Transactions we make become virtual. Corporations and governments will be able to monitor the citizens. Citizens’ concerns have already been expressed at how powerful and influential companies like Facebook and Google have become.

3. The Poor

Charity organizations warn that if we force our societies over the cashless cliff, the most vulnerable members of our societies (the poor) will be further excluded and isolated. This is because the poor are usually unbanked, and they may have no devices to make payments and even have difficulty in receiving financial aid.

4. The Elderly

The elderly is not as tech-savvy as the millennials. They may find the digital payment system more complicated and time-consuming.

5. The Planet

Many NGOs are pointing out that the green promises of the cashless revolution may well backfire. The carbon footprint of financial operations is large, but invisible, which makes it dangerous. Behind each transaction, a domino-effect of computer transactions occur which, once added together, represent an immense strain on the world’s resources and place additional demand on energy producers (Mike Javenson, 2019).

In short, e-wallets provide flexibility to majority of citizens, but not all. A full cashless society remains unlikely. More options are still better than fewer and therefore, whether to go cashless or not, it should be a free choice for citizens, not an imposed agenda.


Mike Javenson, Opinion: The Dangers of a Cashless Economy

Thursday, 2 April 2020

Covid-19: To Peak at 3,700 by Mid May for Malaysia?

On 25 Mar 2020, JPMorgan forecasted that Malaysia’s Covid-19 will likely peak by the middle of April, at around 6300 cases (Read more here).  After JPMorgan’s report was released, Malaysia’s Director General of Health, Datuk Dr Noor Hisham Abdullah pleaded with fellow Malaysians to prove JPMorgan’s forecast wrong by abiding to Movement Control Order (MCO) (Read more here). 

Let’s take a look at the latest data to check whether Malaysians are doing well in proving the forecast to be wrong.  As at 31 Mar 2020, the last day of first phase MCO (18 Mar – 31 Mar), the cumulative cases of Covid-19 was 2766.  In order to study whether the rate of change is slowing down, the first derivative of the cumulative case was plotted. 

Graph 1 is the rate of change of the cumulative cases in 1-Day, 7-Days, 14-Days and 21-Days.  The 1-Day curve is very erratic thus it is difficult to judge whether the rate is slowing down.  The 7-Day curve is less erratic and is curving down.  Both 14-Days and 21-Days curves are still on the rise at a slightly slower pace.  What does this imply?  It means that the Covid-19 spreading rate is slowing down. Once the 14-Days and 21-Days start to curve downwards, the situation can be interpreted as under control.

Next, could we do some forecast based on the data?  Probably.  The Covid-19 cumulative cases and rate of change could be modeled using logistic function and logistic distribution (Read more here).  Graph 2 shows the actual cumulative cases and the best fitted logistic function while Graph 3 shows the actual 21-Days rate of change and logistic distribution 21-days date of change.

The coefficients of the logistic function were determined by maximizing the goodness-of-fit R2 of the Logistic function 21-Days rate of change curve.  In this case, R2 is 0.998.  Based on the forecasted model, the Covid-19 will peak at 3700 cases around mid-of May 2020. 

Looks like we are all doing a good job by flattening the curve! Any success in fighting this Covid-19 pandemic is also due to the excellent people on the frontline led by an able DG of MoH. Thanks from all of us to all of you!!


Wednesday, 1 April 2020

Malaysia Will Face Recession?

Source: The Straits Times

MIER warned that with the MCO extended to April 14, 2020, Malaysia’s GDP may shrink by 2.9% for 2020. That will result in 2.4 million jobs lost and perhaps a million SMEs closing shop. Any further two weeks extension then a contraction of 3-4% is possible. These are MIER’s analysis and present estimates.

Household incomes may fall 12% relative to 2020 baseline and that amounts to RM95 billion. Consumer spending will fall by 11%, even though CPI drops by 4.4%.

MIER suggests a stimulus level of RM95 billion (this includes the RM20 billion package announced by PH) but falls short of how this is secured and settled eventually. It however suggests that the Perikatan Government re-introduces GST in the 2021 Budget. MIER also suggested a National Food Reserve and a Medical Supplies Reserve to meet future eventualities. With the proposed stimulus, MIER expects a V-shaped recovery in 2021.

Singapore now sees 2020 GDP contraction of 1%-4%. GDP fell 10.6% in first quarter from previous three months. Purchasing managers surveys were already showing severe contractions in global output at the beginning of this year. More current figures will show situation is even worse.

The Singapore Government is expected to unveil a new stimulus package later today (26 March). There is good probability the Government will dip into its reserves to fund the stimulus. This should cover cashflow, rental and overheads over a period.

What can we learn?

Malaysia has released a new stimulus package on 27 March, 2020 with cash infusion of RM25 billion. Is that enough? No, we need RM45 billion – RM75 billion cash injection for various initiatives. We could learn from Singapore and U.S. Also, hear out businesses and Associations on their needs. In times like this even the strong grow weaker, what more those who are vulnerable.


1.     Emir Zainul, Malaysia will face recession if partial lockdown extended, MIER warns, 24 Mar 2020, The Edge
2.     Michelle Jamrisko, Singapore’s Economy Plunges in Early Sign of Pain in Asia, 25 Mar 2020, Bloomberg

When do you think Covid-19 will over? free polls

Tuesday, 31 March 2020

Global Recession: Will Stock Market Crash?

The IMF expects a global recession in 2020 which could be as bad as the global financial crisis (or worse), caused by Covid-19 pandemic.

There is no official definition of recession. But it often refers to a decline in economic activity, over certain periods. Most commentators and analysts use, as a practical definition of recession, two consecutive quarters of decline in a country’s real gross domestic product (GDP). Although each recession has unique features, recessions often exhibit a number of common characteristics:

·       They typically last about a year and often result in a significant output cost;
·       The fall in consumption is often small, but both industrial production and investment register much larger declines than that in GDP;
·       They typically overlap with drops in international trade as exports and, especially, imports fall sharply during periods of slowdown;
·       The unemployment rate almost always jumps and inflation falls slightly because overall demand for goods and services is curtailed

What about the stock market?

Historically, recessionary periods did give rise to some of the worst market crashes. Remember the Great Depression? The 1937 recession? The 1973-75 recession? Or the Great Recession? They caused the markets to be cut in half, or worse.

However, not every recession leads to a crash in the stock market. According to Ben Carlson, CFA, there are basically 3 tiers of market downturns that correspond to a recession. The recessions with the worst corresponding market crashes mentioned above are the first tier. These five are the most well-known crashes and the average plunge in these five instances was -59%. The early-2000s crash was more about an unwind of speculation due to the dot-com bubble, nothing to do with a severe economic downturn.

The second tier is the more run-of-the-mill bear markets:

The average retreat in the stock market during these periods was a loss of 27%. None of these recessions or corrections were all that memorable in terms of market history.

And lastly, the corrections that correspond with a recession that never even made it to the technical -20% definition of a bear market:

The average drop in these 4 recession periods was only 16%.

Since first confirmed Covid-19 case in Malaysia, our KLCI index has slumped by 15.8%. It sank below 1,300 on March 16, marking its lowest in a decade. Would it get worse? It may, or may not. We know recessions often hit the stock market, but no one can always predict the market movement rightly. Sometimes it is difficult to understand the logic behind every investment decision made by investors. For instance, on 25th March, KLCI off highs after the Government announced a two-week extension of MCO. The market seemed to be recovering in the short term:


Unlike the 2008 financial crisis that originated from the financial sector, the current economic downturn came completely from outside the financial sector. The Covid-19 pandemic is harming areas like tourism and tourism-related activities, and other economic activities like manufacturing, construction, mining and agriculture following the lockdown.

Greater profits support higher stock prices. Conversely, when economic activity slows, spending declines, profits are reduced, and stock prices fall. If there is no proper measure in tackling the economic downturn, the stock market could continue to decline with this accelerating pandemic!


1.     IMF sees global recession in 2020, recovery in 2021, 25 Mar 2020, The Straits Times
2.     Recession: When Bad Times Prevail, International Monetary Fund (IMF)
3.     Ben Carlson, The Relationship Between Recessions and Market Crashes,
4.     Scott Bauer, How a recession affects the stock market,

When do you think Covid-19 will over? free polls

Monday, 30 March 2020

Is It a RM250 Billion or RM25 Billion Stimulus for Malaysia?

The Federal Government unveiled its stimulus plan to arrest the economic downturn caused by the Covid-19 outbreak.

Many are perplexed by the numbers. On the face of it, it looks massive. But is that true?

The stimulus includes loans, loan payment deferments, rental waivers, exemptions of certain duties or taxes amongst others. The actual cash infusion is only RM25 billion. That includes the previous Government’s stimulus package announced in late February.

What is direct fiscal injection?

Well it is wage subsidies, one-off cash payments, incentives and allowances for front-line people, civil servants, e-hailing drivers and those in the B40 group. This fiscal injection portion is probably 1.65% of GDP (of RM1.51 trillion in 2019, at current prices). Where will the Government get the money? That is not clear. It could be borrowings, off-balance sheet financing, sell assets or secure another special dividend from Petronas.

Malaysia’s economy is in ICU. GDP could shrink by 2.9% in 2020, 2.4 million may lose their jobs and household incomes fall by 12% or RM95 billion. Consumer spending could drop by 11%. These are MIER’s latest estimates.

SMEs could run out of cash in 2-3 months with MCO and the pandemic. Employers need wage support and rent support not loans. If the Government can cover 60-80% of SME’s operating cost then 50% of the SMEs may not close. Datuk Michael Kang, President of SME Association of Malaysia believes closures are imminent and 4 million people are at risk of losing their jobs. SMEs contribute 40% country’s GDP and 20% of exports annually. They also provide 65% of the country’s labour force. So from manufacturing to services, the disaster could be severe.

The PM’s story of the keluarga Makcik Kiah may have some merit but nothing meaningful. Then there are the civil servants and pensioners who receive allowances, when their impact is not going to be as severe as those in the private sector – retailers, restaurant workers, tour agency guides, airline staff and a whole host of others.

How about those larger companies in trouble – Air Asia, Malindo, MAS and other smaller carriers? Pilots, cabin crew and ground staff are all impacted. The US has a USD25 billion package for its airlines and SIA is looking at S$15 billion infusion. Where are we? Rumour has it the Government is in the final stages of setting up a new state-guaranteed asset management company – Danaharta 2.0. This is to bailout troubled businesses reeling from the collapse of the economy/financial markets.

We need more clarity, transparency and accountability. Article 101 of the Constitution requires approval from Parliament. But in practice the Government will move to spend first and then table a Supply Bill later to regularise its position. Other democracies debate their stimulus packages before implementation. Could we not do the same? Or is ours an ‘optical illusion’?
Source: StarBiz


1.     Stimulus packages avert 1930s-style depression, 28 March 2020, The Star Bizweek
2.     KiniGuide: What does the RM250b stimulus plan mean? 28 March 2020, Malaysiakini
3.     Back to the future: Malaysia considers setting up asset management entity to bail out troubled businesses, 26 March 2020, The Straits Times

When do you think Covid-19 will over? free polls

Friday, 27 March 2020

CFA Institute Investment Foundations Program: Chapter 20 – Investment Industry Documentation

In a previous article, we introduced the CFA Institute Investment Foundation Program (Read more here).  It is a free program designed for anyone who wants to enter or advance within the investment management industry, including IT, operations, accounting, administration, and marketing.  Candidates who successfully pass the online exam earn the CFA Institute Investment Foundations Certificate.

There are total of 20 Chapters in 7 modules, covering all the essential topics in finance, economics, ethics and regulations.  This series of articles will highlight the core knowledge of each chapter.

Chapter 20 provides an overview of the investment industry documentation. The learning outcome of chapter 20 is as follows:

·       Define a document;
·       Describe objectives of documentation;
·       Describe document classification systems;
·       Describe types of internal documentation;
·       Describe types of external documentation;
·       Describe document management.

As illustrated in Exhibit 1, documentation in the context of the investment industry does the following:

·       Educates—informs or provides instruction
·       Communicates—conveys ideas, concepts, or information
·       Authorises—provides the basis, and often the authority, for action
·       Formalises—establishes roles, deliverables, and obligations
·       Organises—ensures thoroughness and consistency of action, allowing the company to function more efficiently and effectively
·       Measures—provides a benchmark for measurement and audit
·       Records—preserves learning within the company (also known as institutional memory)
·       Protects—provides assurance of a system to safeguard interests and manage risks

Origin relates to the source of the document. Documents can be classified by their source as
·       original documents,
·       derived documents, or
·       associated documents.

Internal documents are generally administrative and are used to formalise policies, procedures, and processes. Important features of internal documents include context, version control, and regular review.

Policy broadly sets the rules, procedures help apply policies, and processes divide procedures into manageable actions.

Laws and regulations require the creation of a number of policy documents. Some policy documents reflect professional standards that are considered “best practices”. Others are “fit for purpose”, meaning that they meet the company’s needs and requirements.

Procedure and process documents communicate how best to undertake an activity while taking into account internal and external constraints. They are critical for mitigating risk.

Policies, procedures, and processes can be supplemented by useful tools, such as registers and process flow diagrams, to aid users in understanding and completing a chain of linked activities.

External documents are often contractual and enforceable by law, providing protection of rights as well as imposing obligations on the parties involved.

A typical client interaction cycle includes documents related to marketing, on-boarding (including know-your-client and anti-money-laundering processes), funding, reporting, investment events, and redemption.

Client on-boarding is the process by which a company accepts a new client and inputs the client’s details into its records to enable the company to conduct transactions with and on behalf of the client. Companies in the investment industry usually have a legal obligation to verify the identity of a potential client by means of a know-your-client (KYC) process before commencing a relationship with the potential client. The typical KYC process requires the client to

·       complete a questionnaire and provide personal background information, including documentary proof of identity (for instance a passport), addresses, and other personal details.
·       be screened against various global databases to ascertain whether he or she is known or wanted by local or international law enforcement agencies.
·       submit to anti-money-laundering checks at on-boarding and thereafter to identify any potential suspicious transactions that the company would be obligated to report to a regulator.
·       provide proof of the source of funds to verify that the money does not originate from an illegal or criminal source.

Companies must constantly monitor activities and transactions to ensure that they are not suspicious. If something suspicious does arise, companies must report that activity or transaction to the authorities. The heavy penalties imposed by most regulators globally help combat identity theft, criminal activity, and the flow of money from illegal sources into the financial services industry, including the investment industry.

The KYC process also serves to define the client’s level of knowledge and sophistication, assign associated and specific risk profiles, and assess any possible restrictions. Depending on the type of client and the purpose of the relationship, different types of information might be required to ensure that the company provides appropriate products and services for the client’s needs.

Moreover, the KYC process is important in setting the basis for the relationship, in particular to differentiate between discretionary and non-discretionary relationships. Discretionary relationships permit the service provider to act on behalf of the client—for example, as an investment manager with a specific mandate or as a trustee of a trust. In such cases, the service provider must act in the best interest of its clients. In contrast, a non-discretionary relationship permits the service provider to undertake only specific tasks that are authorised by the client on a per task basis.

Document management requires information technology to access, secure, retain, and dispose of documents. It is usually subject to legislative and regulatory constraints.

Client on-boarding documentation refers to: free polls

Thursday, 26 March 2020

Ageing and What Happens to Our Brains?

Photo: iStock/ SIphotography

Our brains control thinking—remembering, planning and organizing, making decisions, and much more. But what happens to the brain as we age?

As we grow older, we may feel changes, including our brains:
  • Certain parts of the brain will shrink, especially those important to learning and other complex mental activities;
  • In certain brain regions, communication between neurons (nerve cells) can be reduced;
  • Blood flow in the brain may also decrease;
  • Inflammation, which occurs when the body responds to an injury or disease, may increase.

Yes, we cannot avoid aging. But we can still maintain our brains’ function before it is too late. Here are 12 ways how :-

1. Get mental stimulation

Perform more brainy activities! Read, learn new things or solve problems. Scientists believe that brainy activities stimulate new connections between nerve cells and may help the brain in generating new cells, developing neurological “plasticity” and building up a functional reserve that provides a hedge against future cell loss.

2. Get physical exercise

Exercise regularly may increase the number of tiny blood vessels that bring oxygen-rich blood to the region of the brain. Exercise also spurs the development of new nerve cells and increases the connections between brain cells (synapses). This results in more efficient, plastic, and adaptive brains.

3. Improve your diet

People that eat a Mediterranean style diet that emphasizes fruits, vegetables, fish, nuts, unsaturated oils (olive oil) and plant sources of proteins are less likely to develop cognitive impairment and dementia.

4. Improve your blood pressure

All parts of the body depend on the circulation, and many organs suffer from the impact of untreated hypertension. One of the organs at greatest risk is the brain. High blood pressure increases the risk of cognitive decline in old age, and is the leading cause of strokes. Lifestyle modification is a significant way to keep your pressure low. Stay lean, exercise regularly, reduce stress, and eat right.

5. Improve your blood sugar

Diabetes is an important risk factor for dementia. You can help prevent diabetes by eating right, exercising regularly, and staying lean. But if your blood sugar stays high, you'll need medication to achieve good control.

6. Improve your cholesterol

High levels of LDL ("bad") cholesterol are associated with an increased the risk of dementia. Diet, exercise, weight control, and avoiding tobacco will go a long way toward improving your cholesterol levels.

7. Consider low-dose aspirin

Some observational studies suggest that low-dose aspirin may reduce the risk of dementia, especially vascular dementia. Ask your doctor if you are a candidate.

8. Avoid tobacco

Smoking speeds up brain ageing (Lothian Birth Cohort 1936). The research found that smokers had a thinner cerebral cortex than non-smokers – in other words, smoking was destroying the grey matter in smokers. This is important because the cerebral cortex is a part of the brain that is crucial for thinking skills.

9. Don’t abuse alcohol

When a person drinks excessively, the liver cannot filter the alcohol fast enough, and this triggers immediate changes in the brain. If you choose to drink, limit yourself to two drinks a day.

10. Care for your emotions

People who are anxious, depressed, sleep-deprived, or exhausted tend to score poorly on cognitive function tests. Poor scores don't necessarily predict an increased risk of cognitive decline in old age, but good mental health and restful sleep are certainly important goals.

11. Protect your head

Moderate to severe head injuries, even without diagnosed concussions, increase the risk of cognitive impairment.

12. Build social networks

New research from the Ohio State University (B. M. Smith, X. Yao, K. S. Chen & E. D. Kirby, 2018) found that mice housed in groups had better memories and healthier brains than animals that lived in pairs. According to the research, a larger social network can positively influence the aging brain.

Basically, cognitive aging is the brain’s version of your body parts working less efficiently due to age, rather than due to disease or serious damage. This loss of efficiency is gradual. But it’s not a disease. Thus, it is important for everyone to be prepared for the aging brain. Make your plan today before it’s too late!

(The above are for informational purposes only and does not constitute the providing of professional medical advice. You should always seek the advice of your physician or other qualified health provider with any concerns regarding your health.)

1.     How the Aging Brain Affects Thinking, National Institute on Aging USA
2.     12 ways to keep your brain young, June 2006, Harvard Health Publishing
3.     Deary, I. J., Gow, A. J., Taylor, M. D., Corley, J., Brett, C., Wilson, V., & Starr, J. M. (2007). The Lothian Birth Cohort 1936: a study to examine influences on cognitive ageing from age 11 to age 70 and beyond. BMC Geriatrics, 7, 28.
4.     B. M. Smith, X. Yao, K. S. Chen & E. D. Kirby (2018), A Larger Social Network Enhances Novel Object Location Memory and Reduces Hippocampal Microgliosis in Aged Mice
5.     Leslie Kernisan, 6 Ways that Memory & Thinking Change with Normal Aging (& What to Do About This),