Stable Ringgit and the decision not to adjust Overnight Policy Rates

 

Bank Negara Malaysia (BNM) responds to a stabilizing ringgit which managed to climb against the U.S dollar over the course of the second quarter. June until present has shown stabilization in the ringgit with rates consistent between RM4.3 and RM4.27 which effectively led to the BNM’s decision NOT to raise the Overnight Policy Rates (OPR).

The rate will remain at the current 3 per cent in to the foreseeable future. The threat of excessive capital outflows has been diminishing simultaneously with the decrease in exchange rate volatility securing BNM’s decision.

Increased domestic demand has helped to strengthen growth along with higher than expected exports. Projections for 2017 suggest that Asian economies will be subject to increased domestic activity as well as rising external demand suggesting prolonged growth for Malaysia.

As for the decision to not change the OPR, a hike would most likely strengthen the stabilizing currency, however, it would come at the cost of inhibiting growth which is currently holding a good pace.

What does this mean for the Ringgit going forward?

The first quarter has experienced higher than expected growth in 2017 BUT, interest rates are changing abroad. Political shocks have been the root of unfavorable losses in the Ringgit against the US dollar for the past three years.

The central bank’s decision to not adjust the OPR following other major economies suggests projected stability not only in the Ringgit, but in the growth outlook for the rest of 2017.

The Federal Reserve followed by several other major banks have increased overnight rates however most of Asia is holding out. The BNM is confident that a mixture of increased demand for exports, greater domestic demand, as well as a stabilizing conversion rate provides the necessary grounds for healthy economic growth.

Have a great day

Stuart

CEO

Farringdon Group

+60 3 2026 0286

Week 28 in Review

Fed chair suggests monetary policy won’t change

China inflation running low

G-20 summit concludes

Bank of Canada hikes rates

US retail sales miss expectations

 

Global equities moved up this week with solid gains. The yield on the US 10-year Treasury note faded seven basis points on the week, to 2.32%, while the price of West Texas Intermediate crude oil moved up to $46.35 a barrel from $44.50 a week ago. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), dropped to 9.89 from 11.75 last week.

 

MACRO NEWS

 

Yellen testifies on Capitol Hill

US Federal Reserve chair Janet Yellen testified on monetary policy before the House Financial Services Committee this week as markets continued to digest the Fed’s recently announced balance sheet reduction plans. Fed Chair Janet Yellen’s semi-annual testimony before Congress struck a generally dovish tone, according to the firm’s traders.

Yellen signalled that the Fed was in no rush to tighten monetary policy, and offered reassurances on the current state of the economy. Investors may also have been relieved that she avoided repeating the reference she had made in late June to asset prices as being “somewhat rich.” Global equities moved up this week with solid gains.

China inflation running Low

The United States is not the only region experiencing low inflation. China’s consumer price index was reported at 1.5%, missing a 3% target. Its producer price index was reported at 5.5%, which was in line with expectations. It is worth noting that the slowdown in inflation is consistent with the slowdown in inflation in the US and many other countries.

It is occurring as policymakers in the US, Canada and Eurozone are all moving, or signalling that they will move, away from the low-interest-rate environment of recent years.

G-20 summit concludes

The G-20 summit of leaders of major economies concluded in Hamburg, Germany this week after discussions on a broad range of topics, including trade, climate change and immigration policy. Many leaders attending the summit appeared at odds with US President Donald Trump, particularly over trade policy and climate change.

On the trade front, Japan and the European Union signed the Japan–EU Economic Partnership Agreement after several years of negotiation.

Bank of Canada raises rates

The Bank of Canada raised rates by a quarter of a percentage point to .75% while suggesting that monetary policy will remain accommodating for the foreseeable future.

Of concern is the stability of the housing market, where prices have risen rapidly in recent years, particularly in areas such as Toronto and Vancouver, where prices have doubled since 2009.

US retail sales off

Headline retail sales were down .2% month over month, with six of the 16 categories falling into negative territory. Department stores in particular were hurt, falling .7% after a similar drop in May.

The recent drop in sales and subsequent selloff in retail stocks have attracted the interest of professional investors in search of a bargain.

 

THE WEEK AHEAD Date Country/Area Release/Event
Mon, 17 Jul Eurozone Consumer price index
Wed, 19 Jul Japan Japan Policy rate
Wed, 19 Jul United States Housing starts
Thu, 20 Jul United States Continuing jobless claims
Thu, 20 Jul Eurozone Flash consumer confidence indicator
Thu, 22 Jul United Kingdom Retail sales
Fri, 21 Jul Canada Consumer price index

 

All the Best and have a great week ahead

Stuart

CEO

Farringdon Group

+60 3 2026 0286

 

UK to Bring in Non-Dom Reforms ‘As Soon as Possible’

The UK government has announced it will introduce long-anticipated changes to the rules governing non-UK domiciles “as soon as possible”, after they were postponed earlier this year because of the snap election.

Under the proposed new non-dom system, which was scheduled to go live 6 April, non-UK domiciles who have resided in the country for more than 15 of the past 20 tax years would automatically be deemed UK-domiciled.

Non-dom status for Britons who return to the UK but claim to have a permanent home abroad was also set to be removed.

The changes, along with many other policies in the Financial Bill 2017, were put on the backburner in the run up to the snap election on 8 June.

Last month, financial advisers in the UK were left facing a period of uncertainty as the UK election resulted in a hung parliament, casting doubts over the future of such tax policies dropped from the finance bill.

In a statement released on Thursday, the UK Treasury announced it will activate the postponed policies, including the new non-dom regime, in a summer bill to be released “as soon as possible”.

“The finance bill introduced in March 2017 provided for a number of changes to tax legislation that were withdrawn from the bill after the calling of the general election.

“The then-financial secretary to the Treasury confirmed at the point they were withdrawn that there was no policy change and that these provisions would be legislated for at the first opportunity in the new Parliament.

“The government confirms that intention. It expects to introduce a Finance Bill as soon as possible after the summer recess containing the withdrawn provisions. Where policies have been announced as applying from the start of the 2017-18 tax year or other point before the introduction of the forthcoming finance bill, there is no change of policy and these dates of application will be retained.

“Those affected by the provisions should continue to assume that they will apply as originally announced,” said the statement.

Other measures delayed which will now go ahead include the money purchase annual allowance (MPAA), which was due to be cut from £10,000 (€11,520, $12,948) to £4,000 on 6 April.

The tax free dividend allowance, is also on track to be slashed from £5,000 to £2,000 by April 2018.

Addressing uncertainty

Chris Groves, partner at international law firm Withers, said: “We can expect with some certainty that the delayed non-dom rule changes will now be brought into force, and will be back-dated to April 2017. Those affected would be well-advised to review their position, if they have not done so already.”

Old Mutual Wealth financial planning expert Rachael Griffin, said: “The ambiguity over these measures will undoubtedly have created confusion and uncertainty for many people – both inside and outside the UK.

“Both the deemed domicile and enveloped dwellings reforms placed on hold before the election were measures that people will have planned for in advance.

“Many people will already have made preparations before the Finance Bill was pared back, so for a lot of people this will simply mean that the plans they had already put in place were worthwhile after all. New clauses have been added to the domicile changes that have made some small amendments, however these are technical changes and the basic principle remains the same.”

All the Best

Stuart

CEO

Farringdon Group

+60 3 2026 0286

 

Credit – International Adviser

Farringdon Group Ltd Launch Asia’s First – Algebra – Huge Success !!!

CEO Stuart Yeomans, CEO of Farringdon Asset Management Martin Young, Datuk Dr. Mohd Daud Bakar and Mr Zulkiflee Saharom FAM Sharia Advisor launching Algebra today.

What a stressful few weeks to finally get this launched. Watch this space for a few more surprise announcements.

Today an Asia’s first……..in the near future there will be a world’s first..

Algebra – Farringdon Group Ltd Launch Asia’s First Shariah Compliant Robo-Advisor on July 10th

“Farringdon Group, an investment and fund management firm headquartered in Labuan, has announced that it will launch a robo-advisory service on July 10. The platform, named Algebra, is based on Shariah investment guidelines and uses a Shariah investment strategy that has been approved by Amanie Advisors founder and group chairman Datuk Dr Mohd Daud Bakar.”

 

Asia’s First Shariah Compliant Automated Investment Service to Launch by Malaysian Company

www.algebra2u.com

Farringdon Group, an investment and fund management firm headquartered in Labuan Malaysia,  is proud to confirm the upcoming launch of its’s new Robo adviser service which follows Shariah investment guidelines. Its Shariah investment strategy is approved by well-known Shariah Scholar Datuk Dr Daud Bakar of Amanie Advisors and the automated investment service will launch July 10th 2017.

Their new system branded as “Algebra” is aiming at revolutionising the way consumers and high net worth individuals receive investment advice and access investment products. Algebra can complete a fact find and calculate its clients risk attitude, from asking questions online. This cuts out the need for expensive consultants that ask similar questions face to face and saves the consumer money immediately.

“This really does embrace fintech and with SEA making technological advances, we feel that the time is right for us to use an automated system which can provide sound financial advice. The beauty of this system is that we do not need to cover high salaries, with sales commission and we are passing 100% of those savings onto our clients.

We have built the Shariah version of this platform and have also incorporated a Non-Shariah option. Hence, whatever your investment profile is, we can mould a portfolio around your investment principals and appetite for risk.

All we ask is for people to give it a go online and then compare our fee structure to those advisers around the region; because we feel that people will be pleasantly surprised. I personally want to stamp out these heavy commissions that charge you up to 5% to enter a fund!” said Stuart Yeomans, Farringdon Group CEO.

After talking with the Algebra team, we found that a total expense ratio would be below 1% per year. To put this into context a traditional adviser in SEA could charge up to 5% to enter a fund and then the fund manager would levy a fee between 1% – 2.5% per year. Some platforms even charge to use their structure and over a medium-term investment a client may pay upwards of 3% or more per year for advice when averaged out.

Algebra can operate with its funds, fees and administration for roughly 0.85% Total Expense Ratio (TER) per year!

We also asked Stuart, why they chose Labuan as their jurisdiction of choice?

“This was a simple choice for us, we are launching an Islamic product, so why not launch it in the Islamic financial hub of the world. Labuan has so much to offer the world, with regards to Shariah Investments and I have lived in Malaysia coming up to ten years now. So, it was a natural choice for our company that has been operating as a broker for 9 years out of Labuan.

We had an option to have our product regulated in mainland Malaysia or to register it in Labuan and focus on the wider region outside of Malaysia. This again was an easy choice for us, because we want volume business and our investments will focus on USD, GBP and EUR throughout the globe. Not to mention that I have worked very closely with the regulator in Labuan for many years and want to help with their vision of expanding products across Asia and more importantly creating jobs on the island.

We are already in talks with some of Malaysia’s banks and investment institutions, for a local RM product that they can operate under their license and welcome more companies that wish to use our system; we can simply come to an agreement for them to have our system for the local market and RM investments. We have no interest in operating a license for local currency, so are happy to co-operate with local license holders and the authorities to give them our system.”

Algebra’s team want to lay the path for lower fees and to change the advisory market as we know it. Essentially offering quality advice with lower fees.

Investment Selection

Algebra relies on smart beta trading algorithms to derive its active equity portfolio, it then blends this with fixed interest ETF’s or Sukuk bond funds, to derive a risk weighted portfolio suitbale for an investors risk appetite.

 “Our team spent a great deal of time developing the smart beta algorithm that powers Algebra. Our smart beta strategy is one of the few Islamic investments in the world which outperforms the sharia S&P 500 index and does so with a lower level of volatility.” said Martin Young Farringdon Asset Management’s CEO in Singapore.

Landing Page

For any additional information or interviews, please contact Stuart Yeomans on the below details:

syeomans@farringdongroup.com

+60 17 315 7543

If you are from the banking or investment industry we are holding a launch event for C level, please get in touch if you would like to reserve your place.