E-wallet challenge 

THE announcement by PUC Bhd that it has secured an e-wallet licence seems to have gotten some of its investors excited, with its shares being actively traded yesterday.

However, procuring a licence to operate an e-wallet is just the beginning of a journey in a business that many others are trying to break into. All banks and another more than 20 non-bank entities have licences to issue e-wallets.

Typically, e-wallets, e-money, or digital wallets come in the form of mobile applications that enable the electronic payment for goods and services.

The potential for e-wallets is massive, going by the experience in China, with the likes of Alipay and WeChat Pay.

China’s mobile payments in 2016 amounted to US$5.5 trillion (RM23.02 trillion) going by some reports.

However, getting a customer to use an e-wallet in Malaysia is not going to be easy.

Firstly, Malaysian customers are already widely served by traditional banks, with most people having at least a debit card that makes cashless payments a cinch.

On top of that, most banks have also embarked on the path of digitalisation, with their own mobile apps and e-wallets for their customers to use. Maybank has the Maybank2u and MaybankPay apps, with the former being an e-account while the latter holds Maybank card data, where users can use their smartphones to tap onto Visa PayWave terminals to complete transactions.

Hong Leong Bank Bhd’s Connect app enables the transfer of funds using mobile numbers and allows users to scan quick response (QR) codes to pay for retail and food and beverage (F&B) purchases.

Non-bank entities trying to break into the e-wallet business will have to convince customers to use their services.

Hence, it is presumed that the customer acquisition cost is going to be quite high, with operators having to fork out hefty sums to draw more users, and maintain its userbase.

E-wallet operators will have to invest in marketing and promotional activities and possibly tie up with other partners to expand the reach of their e-wallets.

While it may be great for consumers who are going to be spoilt for choice, given all these available options, the e-wallet operators going into this game are bound to face challenges in growing their market reach.

FGV board in for a shakeup?

A NEW chairman has been appointed to head Felda Global Ventures Holdings Bhd (FGV), ahead of a crucial decision that the plantation company is due to make on the fate of its president and chief executive officer Datuk Zakaria Arshad.

Datuk Wira Azhar Abdul Hamid was appointed as the new chairman of FGV, replacing Tan Sri Mohd Isa Abdul Samad yesterday.

Azhar is no stranger to the plantation business, as he had headed Sime Darby’s plantation arm before and at one stage was seen as the candidate to head the conglomerate.

After Sime Darby, Azhar went on to head MRT Corp and resigned after an accident in the Sungai Buloh stretch of work.

Azhar’s entry into FGV is no surprise, as it had already been speculated. However, his entry just before the plantation company is due to make a key decision on Zakaria is rather interesting.

Zakaria and three others have been told to go on leave since June 6, pending an investigation into delayed payments by one of FGV’s trading partners from its operations in Afghanistan.

Zakaria has disputed the fact that the amount due cannot be re-claimed from the Afghan company as its headquarters was in Dubai. The CEO of FGV also has said that Mohd Isa had called for his resignation, something he felt was beyond the authority of the former chairman.

The government has the prerogative to appoint the chairman, CEO and a director in FGV being the owner of the golden share in the plantation company.

After Mohd Isa’s departure, Tan Sri Sulaiman Mahbob, who is an economist by training, was made acting chairman of FGV.

Only on Tuesday did FGV come out with a statement stating that the fate of Zakaria and the three others would be known next week. So, things are looking bleak for Zakaria and amongst the reasons are that he spoke out against the former chairman.

However, there are now changes to the FGV board.

Hopefully, this translates to a better and more stable FGV and puts to rest the fate of Zakaria and his three colleagues.

Ringgit unleashed

IS confidence coming back to the ringgit? It appears so, although in the face of a broadly weaker US dollar, it can be hard to gauge the fundamental strength of the ringgit.

The strength of a currency usually reflects the economic fundamentals of a country. It is not surprising that the ringgit is strengthening because economic growth in the first half of the year has beaten forecasts, but how convincing is this strength?

There has been a more discernible trend of US dollar weakness since the middle of last week that has accelerated through this week. This has definitely benefited the ringgit and other emerging-market currencies.

But what makes the ringgit more convincing is the rise against other currencies too. It has strengthened in the past week against the yuan, the Singapore dollar, the baht and the rupiah.

Perhaps, investors are finally convinced about the economic fundamentals and that the ringgit’s rise is no longer just about the US dollar weakness.

The Malaysian economy’s outlook for this year has also been revised higher and there are hints that higher growth numbers will be made official when Budget 2018 is tabled in Parliament later next month.

Exports have been surging and private consumption numbers appear to be holding up despite the wobbles from inflation, which while moderating from the March peak, is still elevated.

Looking past the headline numbers, external demand does look robust. The latest trade data from July shows that electrical and electronic (E&E) goods, which make up 35.5% of exports, surged 28.3% year-on-year.

Looking ahead, the export-driven E&E subsectors will do well, as projections show global semiconductor sales to grow by 11.5% this year.

With a growing manufacturing sector, there will be a spillover effect on the rest of the economy and especially on the services sector, which is more domestic-oriented. It is to be hoped that employment and wages will rise as businesses expand, contributing to private consumption and investment.

Another way of looking at growth indicators is to look at the levels of imports and these look healthy. Intermediate goods, which are used for components for other manufactured goods and consumption goods, especially the segment for household goods, were up in the month of July, both on-year and month-on-month. Businesses continue to expand, as seen from banks’ business loans growth and capital goods imports.

Given that the Malaysian economy is part of the global supply chain, how well her trade partners fare is as important. And the good news is that private consumption was the main growth driver of the US economy in the second quarter, while China’s second-quarter macroeconomic data indicates that domestic demand remains the mainstay of growth.

Then, there is the matter of a rate hike. The latest Bank Negara statement did not indicate that the benchmark overnight policy rate will be raised anytime soon despite rising core inflation, which unlike the more familiar headline inflation, excludes energy and food prices.

Expectations of a rate hike are sure to rise as economic growth sustains, as this will bring with it inflationary pressure. Investors may find yields of ringgit-denominated assets more alluring if the benchmark rate is raised, which could mean a stronger ringgit.