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The 3 most important things in Asian fintech right now
FinTech
<p>Asia is becoming a major force in fintech and its ecosystem is already broad, covering various sub-sectors across payments, lending, data security and risk management - to name a few.</p> <p>So what’s important? At a KPMG FinTech Forum in Hong Kong today,  the industry was boiled down to three main three themes: blockchain, financial inclusion, and regulation. James Mckeogh, a partner with the firm  - AKA KPMG Hong Kong's “Mr. Fintech” - explained why they are important:</p> <p>Blockchain</p> <p>Forget Bitcoin, it’s all about blockchain - Bitcoin's underlying technology. Over the next 18 months this will be one of the biggest areas of investment for fintech. But its not about handling cryptocurrencies, said Mckeogh, its about using the technology to achieve speed, "auditability," and control on any asset-based transaction. “We are seeing a huge rise in interest in the blockchain and a rise in the development of solutions utilizing blockchain as a protocol, and we will continue to see that rise,” he said. He also predicts the next three months will see the emergence of solutions that will fundamentally change the way financial institutions transact. </p> <p>Financial inclusion</p> <p>This is not about giving money to poor but about making sure the right financial services get to the right people at the right time, said Mckeogh. While a lot of the focus has been on the African subcontinent, there a lot of people under-served in Asia. "This isn’t the non-banked,” said Mckeogh. “This is just these under-banked, and we are going to see Hong Kong play a key role in developing and rolling out the solutions, in order to address that gap.” This space will not only be about technology development but also product development, he added, sharing  ideas to come up with the best product to take to the under-banked market. </p> <p>Regulation</p> <p>There is already a lot of development going on to address issues of compliance that arise as banks try to keep up with technology. “Real time monitoring is really coming into play, and we are seeing a real  change in how regulatory issues  can be addressed,” said Mckeogh. “It comes down to collaboration and  the number of the companies that are addressing this issue.” The only way  to solve the issues over fintech regulation, he added, was through economies of scale and not working in silos. By sharing information and working collaboratively, banks can affect better regulation and make sure it is geared  towards new ways of working in a turbulent time for the financial services industry.</p> <p>James Mckeogh will join a panel discussion at the NexChange and Cyberport Inagural Fintech O-2-O Meetup on September 22.<br /> Photo: FamZoo staff</p>
More volatility on U.S. horizon has sights turning to Asia
Capital Markets
<p>Weekly Commentary Overview</p> <p> After weeks of struggling, global equities stabilized last week. Both stocks and bonds are benefiting from relative stability in overseas markets as well as some easing of China fears.<br /> While investors caught a bit of a breather last week, volatility remains elevated.<br /> We expect this pattern to continue given the persistence of several factors: a shift in the credit environment, a pending interest rate hike by the Federal Reserve (Fed) and expensive stock valuations.<br /> And although the bumpy ride is expected to continue, creating challenges for investors, we also see opportunities.</p> <p>Stocks Steady Down, for the Moment<br /> After weeks of struggling, global equities stabilized last week. In the U.S., the S&amp;P 500 Index rose 2.08% to 1,961, the Dow Jones Industrial Average climbed 2.05% to 16,433, and the tech-heavy Nasdaq Composite Index advanced an even stronger 2.97% to end the week at 4,822. Meanwhile, the yield on the 10-year Treasury rose from 2.13% to 2.19%, as its price correspondingly fell.</p> <p>While investors caught a bit of a breather last week, volatility remains elevated. And although the bumpy ride is expected to continue, creating challenges for investors, we also see opportunities. In particular, Asian equities, both in Japan and emerging markets (EMs), look attractive right now relative to other regions.<br /> U.S. Stocks Still Pricey<br /> For the most part, stock and credit markets advanced last week. Encouragingly, the rally in stocks was led by more cyclically sensitive sectors, such as transportation, banks and semiconductors. Credit markets also stabilized, with the spread between the yields of high yield bonds and 10-year U.S. Treasuries now roughly 50 basis points (0.50%) tighter than just a few weeks ago, implying more investor appetite for risk.</p> <p>Both stocks and bonds are benefiting from relative stability in overseas markets as well as some easing of China fears. Still, volatility remains elevated. Looking at realized returns over the past month, annualized volatility on the S&amp;P 500 Index is above 30%, triple the level from early August. We expect this pattern to continue given the persistence of several factors: a shift in the credit environment, a pending interest rate hike by the Federal Reserve (Fed) and expensive stock valuations.</p> <p>On the latter, while large-cap U.S. equity multiples are now 7% below their February peak, valuations remain above the long-term average. This is problematic given the pending shift in U.S. monetary policy. Quantitative easing is gone, and while this week’s Fed decision remains a coin flip (will the Fed raise rates or not?), there is no question that U.S. monetary policy is at an inflection point.</p> <p>Even if the Fed demurs until later in the year, short-term rates are climbing. Last week, two-year Treasury yields traded to just below 0.75%, a high for the year. Without the tailwind of easier money, U.S. equities will need to get by on earnings growth, of which there hasn’t been much of late, rather than monetary policy-induced multiple expansion.</p> <p>The outlook for U.S. stocks may be muted, but we do see opportunities in other parts of the world, particularly in Asia.</p>
Massive net buying by foreigners in APAC
Asset Management
<p>In emerging Asia ex. China and Malaysia, yesterday’s [September 16] net foreign buying of $0.8 billion turned out to be the single biggest day for net foreign buying since April 2014, notes Credit Suisse Group AG (ADR) (NYSE:CS). Sakthi Siva and King Nang Chik said in their “APAC Equity Strategy” report that they continue to be Overweight the cheapest four markets: MSCI China, Korea, Taiwan and Singapore.<br /> Yesterday’s relief buying in APAC after substantial selling by foreigners<br /> Siva and Chik term it “a pleasant surprise” when net foreign buying of $789 million was logged in Emerging Asia ex. China and Malaysia on Sept. 16, after the net foreign selling over the past four months. The analysts point out that yesterday logged net foreign buying of $470 million in India, followed by $184 million in Korea and $158 million in Taiwan:</p> <p>However, Siva and Chik note the $789 million of net foreign buying comes after net foreign selling of $21 billion out of Emerging Asia ex. China and Malaysia. As can be deduced from the following table, net foreign selling over the past three to four months out of Emerging Asia ex. China and Japan is $36.3 billion:</p> <p>The CS analysts point out that on a rolling 12-month basis, net foreign buying has dropped to 0% of market cap on a rolling 12-month basis for Emerging Asia ex. China and Malaysia:</p> <p>Foreign investor capitulation in a few APAC markets<br /> Highlighting the markets which have witnessed foreign investor capitulation, Siva and Chik point out that Korea (-0.1%), the Philippines (-0.4%), Indonesia (-0.7%), Thailand (-1%) and Malaysia (-1.5%) witnessed foreign investors turning net sellers over the past year:</p> <p>However, in a few markets, including India, foreigners are still net buyers over the past 12 months:</p>
Daily Scan: Asian stocks mixed, bonds rally as Fed stands pat on interest rates
Capital Markets
<p>Updated throughout the day</p> <p>September 18</p> <p>Good evening everyone. Well its seems that instead of quelling uncertainty over the global economy, the Federal Reserve decision to stand pat on interest rates was more confusing than calming. Asian stock markets went 'huh?' and bond markets rallied. The Shanghai and Hong Kong indices rose a modest 0.38% and 0.30%, respectively. Markets in Jakarta, Kuala Lumpur, and Tokyo were all down. This is how the major Asian markets looked at the close of play:</p> <p> Jakarta Comp: -0.32%<br /> KLSE Comp: -1.01%<br /> Nikkei 225: -1.96%<br /> Straits Times: +0.29%<br /> Seoul Comp:+0.98%</p> <p>The Financial Times noted core sovereign bonds benefited from anxiety at the Fed that global economies might be struggling to grow. Industrial commodities struggled for traction. The FTSEurofirst 300 index is off 0.7%, while US index futures indicate the S&amp;P 500 will dip when the starting bell ring in New York. </p> <p> Here’s what else you need to know:</p> <p>Danke, Janet. With Yellen &amp; Co. keeping rates unched, European bond yields are starting to drop like flies. German 10-year bund yields have fallen 0.09% to 0.688%, while Portuguese and Italian 10-year bond yields slide to 2.532% and 1.793% respectively. Grazie mille, Signora Yellen! Financial Times (paywall)</p> <p>1MDB “misplaces” another $1 billion. As if it wasn’t bad enough that $700 million of its cash went into the prime minister’s accounts and that $1.4 billion due to a Middle Eastern counterparty vanished into thin air, Malaysia’s state fund 1MDB is now in the hot seat after a reported $993 million payment it made to the International Petroleum Investment Co. – Abu Dhabi’s sovereign fund – somehow never reached the emirate. Wall Street Journal</p> <p>Hungary begins fencing off its borders. In an effort to stem the tide of migrants, Hungary has begun erecting a fence along its border with Croatia as well as with Serbia. Prime Minister Viktor Orban called it a move that will prove “to the people, ourselves and the whole world that even as a flood [of migrants] is heading toward Europe, this tide can be curbed, channeled in an organized way, and checked for [security] risks if everyone did their job.” Wall Street Journal</p> <p>China relaxes rules for trafficked kids. China has relaxed rules for the legal adoption of trafficked or abandoned Chinese children, state media reported on Friday, as the government works to combat the pervasive problem of child trafficking. Channel News Asia</p> <p>Smog smothered Indonesia rejects Singapore’s help. Indonesia has again declined Singapore's offer of help in fighting haze-causing fires, with Environment and Forestry Minister Siti Nurbaya Bakar saying Indonesia is trying to handle the situation on its own. </p>
For the Fed, it's a small world after all
Asset Management
<p>The Federal Reserve looked at the data in the U.S. And China. And Europe. And decided: Now is not the time to lift rates, even symbolically, from their historically low levels.</p> <p>The world is getting smaller by the minute.</p> <p>The Fed's mandate to manage employment rates in the U.S. has become greatly tied to the health of global economies.</p> <p>"It's hard to think about jobs without thinking about where you sit around the planet," says says Jeff Moore, portfolio manager at Fidelity. The U.S. job market has been steadily if slowly improving over the past few years. Unemployment stands at 5.1%. Not good enough to lift rates, the Fed basically said in its statement. Weakness overseas threatens the recovery in the U.S. Higher rates will keep the dollar strong, which will make our goods pricey for our trading partners and hurt business. "It's all connected to the jobs piece," says Moore (who says he is not speaking on behalf of Fidelity).</p> <p>China and the global market volatility in August played a large role in the Fed's decision, says Lee Ferridge, head of North American macro strategy at State Street Global Markets. The strong dollar has tied the Fed's hands. It's "the doorway" between the global and domestic economies, says Ferridge. He's not convinced that a rate rise is in the cards this year.</p> <p>Caution comes naturally to a central banker. The Fed would rather err on the side of raising rates too slowly than too quickly, says Moore. The delay in a rate rise "give(s) some breathing room to emerging market countries," he says. "Even the Chinese story; it gives it more time."</p> <p>The hesitation can backfire. "(It) is bound to prompt uncertainty,” says Nigel Green, founder of deVere Group. "By not raising interest rates, the Fed is, in effect, sending out a clear message that it is nervous about China, and the impact a potential hard landing could have on U.S. and global growth," he says.</p> <p>Legg Mason agrees. "Until it actually moves on rates, lingering uncertainty about the timing of a increase could be a source of volatility in the markets – and perpetuate concerns about distortions in market pricing that result from years of zero-rate policy," the firm wrote in a statement.</p> <p>Photo: charamelody </p> <p>&nbsp;</p> <p>&nbsp;</p>
Daily Scan: Rates stay steady, markets dip
Capital Markets
<p>September 17</p> <p>Good evening.</p> <p>The decision is out: the Federal Reserve will not be raising interest rates yet, but Chairwoman Janet Yellen promises that a 2015 rate rise is still the goal. Stocks were up slightly midday, but dipped after the Fed announcement. The Dow closed with a 0.4% loss. The S&amp;P 500 fell 0.3%, but the Nasdaq posted a 0.1% gain. Oil fell slightly, dropping just below $47/barrel.</p> <p>Here's what else you need to know:</p> <p>Ron Perelman quits Carnegie Hall board. The financier announced his resignation, effective next month, following ongoing battles with Carnegie Hall leaders. Perelman says the hall lacks transparency in operations, and the process of approving third-party transactions is lacking. Wall Street Journal</p> <p>FIFA exec suspended. Jerome Valcke, the second highest ranking FIFA official, is on leave while under investigation for corruption. Valcke may be tied to the black-market sale of World Cup tickets. New York Times (paywall)</p> <p>Florida woman arrested for weapons warehouse. Nikole Dykema reportedly had at least 3,714 bladed weapons, including machetes and hatches, in a house. The 47-year-old woman also booby trapped the home and yard. It's not clear why Dykema had the weapons, but she was arrested for a parole violation. CNN</p> <p>The military in Burkina Faso has staged a coup. Just days before the general elections, the military has seized the President and Prime Minister and declared military rule. An official called out the leaders of the West African nation as a "deviant transitional regime." Ex-general and former presidential advisor Gilbert Diendere has been declared the new leader. CNN</p> <p>Housing starts edge lower in August; stocks edge higher. Starts fell to 1.126 million, 3% below the July level which were revised downward along with June. Housing is recovering, but is still well below the norm. Stocks climbed after the report -- could there be some traders hoping the disappointing numbers will thwart a rate hike?</p> <p>Carly Fiorina shines in raucus Republican debate. The former Hewlett-Packard CEO appeared to rattle the usually unflappable Donald Trump, the frontrunner. The other nine Republican challengers chipped away at Trump, chastising him for his personal insults and questioning his ability to stand on the world stage. CNBC</p> <p>&nbsp;</p> <p>Japan upper house OKs defence bills amid chaos. A panel in Japan's upper house on Thursday approved legislation for a security policy shift that would allow troops to fight abroad for the first time since World War Two, a ruling party lawmaker said. Opposition lawmakers tried to physically prevent the vote in a chaotic scene carried live on national television. The legislation has sparked huge protests from ordinary voters. Channel News Asia</p> <p>Chile coast rocked by 8.3 magnitude quake. At least five people were killed and 1 million </p>
Vanguard says the Fed risks 'being held captive to the markets' by inaction
Asset Management
<p>Editor's note: This is a statement from Vanguard's senior economist, Roger Aliaga-Diaz on the decision by the Federal Reserve to keep interest rates at zero.<br /> The Fed's decision to hold off on a rate increase is a clear indication to the markets that this rate cycle will be different, with international conditions and US dollar strength weighing more on the decision than in the past. We are concerned with the Fed's acknowledgement of recent market volatility in its decision. The Fed runs the risk of being held captive to the markets, as, paradoxically, much of that volatility is due to the anticipation and uncertainty around when the Fed will move.</p> <p>Vanguard believes that focus should remain on how the Fed proceeds after the initial increase in rates. Given current conditions, we believe a take-off in 2015 is warranted and continue to stress our view of low and slow. The US economy remains strong relative to global peers, and we expect that resiliency to remain.<br /> Photo: Brookings Institute</p>
Traders react to Fed decision: Just watch what Yellen does to the VIX
Lifestyle, 4:01
<p>Traders react to news that the Federal Reserve is leaving interest rates at zero percent.<br /> LOL. VIX down 8% "@Henry_Chinaski: $SPY $VIX $VXX $UVXY this pic doesn't get old"</p> <p>— StockTwits (@StockTwits) Sep. 17 at 02:28 PM</p>
Daily Scan: Military coup takes Burkina Faso; Fed decision looming
Capital Markets
<p>September 17</p> <p>Good afternoon. It's D-Day in Washington, D.C. The voting members of the Federal Reserve's policy-making committee will announce whether they will stand pat on interest rates or raise them. For the past week, virtually every move in the market has been ascribed to traders waiting for this moment. There's plenty of data to support a hike as well as data to support continued allegiance to Zirp -- zero interest rate policy. What's your thought? Is the U.S. economy robust enough to handle a 25 basis point rate hike? Job formation is solid but consumer prices fell in August. FedEx had surprisingly weak earnings and China has a cold that is infecting the economy globally. What say you? Policy announcement lands at 2 p.m. ET; presser with Fed Chair Janet Yellen at 2:30 p.m. ET. In the mean time, stocks are tentatively looking up. Ish. The Dow gained 0.14% Thursday morning, the Nasdaq was up 0.37%, and the S&amp;P 500 climbed 0.21%.</p> <p>Here's what else you need to know:</p> <p>The military in Burkina Faso has staged a coup. Just days before the general elections, the military has seized the President and Prime Minister and declared military rule. An official called out the leaders of the West African nation as a "deviant transitional regime." Ex-general and former presidential advisor Gilbert Diendere has been declared the new leader. CNN</p> <p>Housing starts edge lower in August; stocks edge higher. Starts fell to 1.126 million, 3% below the July level which were revised downward along with June. Housing is recovering, but is still well below the norm. Stocks climbed after the report -- could there be some traders hoping the disappointing numbers will thwart a rate hike?</p> <p>Carly Fiorina shines in raucus Republican debate. The former Hewlett-Packard CEO appeared to rattle the usually unflappable Donald Trump, the frontrunner. The other nine Republican challengers chipped away at Trump, chastising him for his personal insults and questioning his ability to stand on the world stage. CNBC</p> <p>Altice to buy Cablevision in $17.7 billion deal. The European telecoms group has been growing rapidly through acquisition, led by Patrick Dahi, the French-Israeli billionaire. Drahi has been negotiating with the fourth largest cable operator to expand Altice's presence in the U.S. Reuters</p> <p>Swiss central bank leaves rates at -0.75%. The economy is still struggling and the Swiss franc remains stubbornly strong vs the Euro -- even though the central bank removed the trading cap on the currency earlier in the year.</p> <p>Don't even bother showing up in the morning.  The mainland markets in China wiped out most gains in the last hour of trading.  The Shanghai Composite slid 2.1% following its best trading session in weeks. Hong Kong’s Hang Seng Index retraced gains, ending the day 0.53% lower. The Nikkei 225 bucked the trend rising 1.43% despite</p> <p>Japan upper house OKs defence bills amid chaos. A panel in Japan's upper house on Thursday approved legislation for a security policy shift that would allow troops to fight abroad for the first time since World War Two, a ruling party lawmaker said. Opposition lawmakers tried to physically prevent the vote in a chaotic scene carried live on national television. The legislation has sparked huge protests from ordinary voters. </p>
HSBC becomes HSBC UK in ‘radical’ rebranding
Lifestyle, 4:01
<p>After more than а month-long review on a potential name change, the UK’s largest lender has decided to keep ‘HSBC’ in its domestic banking division brand, Finbuzz reports. </p> <p>An internal staff email last week said of the change: “It soon became obvious that everyone preferred a name that maintains a strong connection to HSBC, and a clear commitment to the UK.”</p> <p>HSBC, also Europe’s largest bank, announced plans to rebrand earlier this summer. The announcement had the chatting classes speculating whether or not HSBC would revive its Midland Bank brand which it acquired in 1992.</p> <p>One legacy of Midland Bank that HSBC UK will adopt is location, as the 26,000 banking employees will be based in Birmingham, the former Midland Bank centre. The HSBC UK name comes into effect from 1 January 2018, and will be used at the bank’s 1000 UK branch locations.</p> <p>The name change comes ahead of the new banking rule that requires lenders to ‘ring-fence’, or separate, high-street and investment banking operations. “[Setting] up the UK ring-fenced bank in Birmingham is a key strategic action for the group,” Gulliver said.</p> <p>“Our ambition is to be the bank of choice in the UK and as a name, HSBC UK will build on the global connectivity and customer trust of the HSBC brand and differentiate us in a competitive market.”</p> <p>This article originally appeared on Finbuzz.<br /> Photo: Elliott Brown</p>