Alternative funds have been one of the fastest-growing segments of the mutual fund industry in recent years. “Alt funds,” as they are commonly referred to, seek to provide attractive absolute and relative long-term returns, typically with lower risk than stock funds. They can offer diversification to traditional stock and bond portfolios.
When one considers the current rock-bottom bond yields, high stock valuations and the market’s recent volatility, it’s not difficult to understand alt funds’ appeal.
But some alternative mutual funds have fallen short. Their proliferation has increased the choices, making the research process even more important in selecting a solid fund for your clients.
For over a decade, our firm has invested in alternative strategies, including alternative mutual funds, for our clients. We have reviewed scores of these funds over that time period. Here are 10 rules to consider when researching them:
1. Begin With The End In Mind.
There are many varieties of alternative investment. The first step in evaluating an alternative mutual fund is determining what you are trying to accomplish. What level of risk, return and correlation to stock and bond markets are you looking for? Are you looking for a low-risk bond surrogate, a more growth-oriented (and thus riskier) strategy, or something in between? If you are adding alternatives to a traditional stock and bond portfolio, what asset classes are you reducing to make room for the new strategy? Knowing may help you determine the characteristics of the alternative investment you’re looking for. Alternative investment strategies sometimes promise to deliver “stock-like returns with bond-like risk,” but things that sound too good to be true usually are.
2. Don’t Skip The Basics.
Your research on alternative investments should include all of the due diligence you would normally conduct on traditional investment managers. That means evaluating a manager’s “four P’s”: its people, process, philosophy and performance. Quantitative data such as performance is available in mutual fund databases. The management firm’s investment presentation, shareholder reports and commentaries from recent years should offer insight on its people, investment process and philosophy. After you read these documents, a phone interview with the portfolio manager can help you understand his or her thinking. Finally, face time with key members of the investment team during on-site visits will be very useful in helping you assess the qualitative aspects of the manager.
3. More Complicated Strategies Take More Time To Research.
Alternative mutual funds are often more complicated than traditional stock and bond mutual funds. As fiduciaries, we are responsible for thoroughly investigating and researching the investments we recommend to our clients. For example, we followed managed futures strategies for years before investing in a fund for our clients. We wanted to take extra time to really understand how the investment worked. It should go without saying, but if you don’t have a good understanding of a strategy, you shouldn’t recommend it to your clients.
4. Ask What Could Go Wrong.
Risk is often thought of as volatility or the standard deviation of returns. When evaluating alternative investments, advisors should seek to gain a deeper understanding of the risks the strategy is taking and what could go wrong. We want to uncover hidden risks that may not show up in the investments’ historical standard deviation. The risk section of a fund’s prospectus can provide you with clues for investigating the risk of a strategy. For example, does the strategy employ leverage, use derivatives, invest in illiquid securities or use counterparties? What are the risks related to each? Other questions we often ask: What is a perfect storm for this strategy? How much could the strategy lose in that scenario? What risks does the portfolio manager believe are the most significant? In which environments is the strategy expected to do well—and in which will it likely do poorly?
5. Compare Apples To Apples.
It would be silly to compare a small-cap value fund with an emerging markets equity fund or compare a high-yield bond fund with a municipal bond fund. So it’s important to remember that alternatives also cover a wide range of similarly diverse strategies. Morningstar currently breaks the alternative universe into more than a dozen categories including long/short equity, bear market funds and market neutral funds. When researching alt funds, it’s important to compare those that follow similar strategies. Even within categories, the strategies can vary greatly in their approach.
6. Past Performance Is No Guarantee, But Still Nice To Have.
Past performance is no guarantee of future returns, but it is helpful to see how a fund has performed in the past. Because so many alternative mutual funds have come out in recent years, many don’t have a five-year or even a three-year track record. Some funds with shorter track records offer historical performance from either a similar institutional strategy or back-tested data. But a strategy in a mutual fund may be very different from an institutional strategy because there are limits on illiquid investments, limits on leverage and diversification requirements, to name just a few potential differences. It’s important to understand the differences before you can determine whether the institutional track record is applicable to the fund strategy. Also, it is good to confirm that the performance data is actual live data and not back-tested data. Back-tested data always looks good! If the institutional strategy is very similar to the fund’s, you can be comfortable analyzing it.
7. Consider Market Cycle Performance In Standard Time Periods.
In addition to looking at performance over the standard one-, three- and five-year time periods, it is important, especially with alternative strategies, to review how funds perform during different parts of the market cycle. We like to review performance from the peak of the market to the trough, from the trough to the peak, and over the full market cycle. Standard one-, three- and five-year time frames may all take place during a bull market, giving you only half the story.
8. Consider Risk-Adjusted Performance.
Within alternatives, more so than in traditional stocks and bonds, strategies may be run with more or less risk, and you need to account for that when comparing strategies. For example, one long/short equity strategy may typically be 40% net long and another 20%. Using risk-adjusted performance measures such as the Sharpe ratio is helpful when comparing managers with different risk characteristics.
9. Consider The Correlation To Stock And Bond Markets.
Part of the appeal of alternative investments is the diversification they offer apart from traditional stock and bond markets. But it’s important to consider how correlated each alternative investment is to those markets and how much diversification it will provide to the portfolio. Those correlations may change over time as well. For example, managed futures strategies may have a positive correlation to stocks during bull markets and a negative one during bear markets.
10. Don’t Forget Taxes And Expenses.
Alternative mutual funds are often less tax-efficient and often have higher expenses than traditional stock and bond mutual funds. It may make sense to buy an alternative fund in a tax-deferred account, but if the fund will be in a taxable account, evaluate the after-tax returns. When you review expenses, remember that some alternative mutual funds are funds of funds and have two layers of management fees. Funds that short stocks as part of their investment strategy will have to pay short interest and dividend expenses in addition to management fees. When considering alternative mutual funds, review the components of the expenses to understand them and look for lower fee options that are less of a hurdle for a manager to overcome.
Now that they are seven years into a bull market facing extremely low bond yields, investors’ attraction to alternative mutual funds would be understandable. However, the proliferation of these funds in recent years makes thorough research and due diligence by advisors and investors even more important if they are to select strategies that will be a good fit for them.
The bad news just doesn’t stop for Asia’s worst-performing currency.
Already reeling from a renewed slump in oil prices and a political scandal that just won’t go away, the Malaysian ringgit is now facing the prospect of another cut in interest rates. It’s the region’s biggest loser in the past month and analysts still see scope for it to drop more than 2 percent by year-end.
The currency’s slide highlights all is not well as the nation’s economy heads for its worst performance this decade. Crude oil’s plunge to a four-month low this week undermines the finances of net oil exporter Malaysia, while the appeal of its relatively high bond yields is being tempered by the scandals surrounding a troubled state investment fund. Rabobank Group and UBS Group AG both predict Bank Negara Malaysia will add to its first rate cut in seven years in coming months.
Another rate reduction “will be a further negative for the currency because one of the things that’s attractive about it is it’s got a relatively high yield,” said Michael Every, head of financial markets research at Rabobank in Hong Kong. “They’ve been extremely stable on the interest-rate front up until the last cut. If we get another one, it will get the market thinking: ‘What do they know that we don’t?’”
July’s easing was a “pre-emptive move” and there are no current plans to adjust rates again over the next few meetings, although policy makers will look at data to see what is needed, central bank Governor Muhammad Ibrahim told the official Bernama news agency in an interview published July 14. Malaysia is able to absorb external shocks should the global economy deteriorate, Muhammad told Bernama.
Brent crude’s 13 percent slump this quarter is exacerbating Malaysia’s woes. Sliding energy prices have eroded export earnings and rising costs are curbing business investment. Economic growth slowed to the least in more than six years in the first quarter, and analysts project it will ease to 4.2 percent for the year as a whole, the least since 2009.
The outlook for the currency is linked to oil prices as Malaysia derives 20 percent of its revenue from energy-related sources. The nation loses 450 million ringgit in annual income for every $1 decline in oil, the prime minister said in April.
Lagging Behind
The ringgit has dropped 1.3 percent in the past month, underperforming its regional peers which all recorded gains except for the Philippine peso and Indonesia’s rupiah. The currency traded at 4.051 per dollar as of 7:56 a.m. in London on Thursday. It was as strong as 3.142 in August 2014, when oil was still above $100 a barrel.
The ringgit will weaken to 4.10 per dollar by the end of September and 4.15 by year-end, according to the median estimates of analysts surveyed by Bloomberg. Rabobank is more bearish, predicting 4.15 by Sept. 30 and 4.30 by the end of December, Every said.
Bank Negara unexpectedly cut its benchmark interest rate by a quarter point to 3 percent on July 13 to bolster growth, and analysts say pressure is building for another move.
UBS projects the central bank will make another quarter-point rate cut by early next year and the ringgit will weaken to 4.40 per dollar by the end of December in anticipation. Three-year bonds yield five basis points less than the central bank rate, signaling investors see a chance for further easing.
‘Common Problem’
“Malaysian export growth continues to be weak, a common problem among emerging-market economies, and the current-account surplus is expected to narrow further, which could put pressure on the currency when portfolio inflows slow,” said Maximillian Lin, a currency strategist at UBS in Singapore.
Sentiment toward the economy has soured as global probes into 1Malaysia Development Bhd. gathered pace, raising the stakes in a scandal which has dogged Prime Minister Najib Razak for more than a year.
1MDB is at the center of a controversy involving accusations of embezzlement and money laundering. It defaulted on a $1.75 billion bond in April amid a dispute with the co-guarantor as to who was liable for the payment.
U.S. prosecutors said on July 20 they’re looking to recover more than $1 billion in assets they contend were siphoned from 1MDB, whose advisory board Najib chaired until recently. The Monetary Authority of Singapore announced a day later it had seized S$240 million ($179 million) in assets from individuals linked to alleged fraud at the fund. Najib and 1MDB have both denied wrongdoing.
‘Fairly Benign’
Not everyone is bearish.
JPMorgan Chase & Co. predicts the ringgit will stay between 3.90 and 4.10 per dollar in the second half as Malaysia’s relatively high bond yields attract investors. That scenario would only be threatened if the Federal Reserve were to raise interest rates at the same time as Bank Negara cuts them, its foreign-exchange analysts say.
“If the Fed outlook was fairly benign it’s not likely that another rate cut would hurt ringgit sentiment all that much,” said Jonathan Cavenagh, head of Asia emerging-market currency strategy at JPMorgan Chase in Singapore. “Outright yields are still quite high, particularly compared to the major developed markets. Hence we would expect limited downside in the ringgit.”
While Malaysian bonds offer the second-highest interest payments in Southeast Asia after Indonesia’s, they are losing their allure. The yield on the benchmark 10-year security dropped to 3.62 percent on Thursday, from as high as 4.45 percent in August 2015.
“High foreign participation in the local currency bond market — we estimate 34 percent of outstanding Malaysian government securities are owned by foreigners — makes the ringgit very sensitive to the Fed outlook and to domestic political developments,” UBS’s Lin said. - Bloomberg
IN the world of serious portfolio investing, the BIG 3 asset classes are equities, fixed income and cash. There are also two outlier asset types: investment real estate and alternative investments, or alts, which round off the full set of five asset classes the world’s savviest investors use to construct their wealth accumulation vessels.
In recent weeks, I have written on the roles of cash, fixed income, equities and investment real estate within a portfolio. Today, we complete our set by looking at alts.
Alts is a convenient catch-all category for six asset segments or asset subclasses used by wealthy investors to a modest extent. According to the 2016 World Wealth Report (2016 WWR) published by Capgemini in late June, earlier this year, the world’s wealthiest people sank 15.7 per cent of their investment wealth in alts. The alts asset class comprises half a dozen asset segments — hedge funds, structured products, private equity, derivatives, foreign currency and commodities.
Despite being very different from one another, the six asset segments have one striking similarity: they have low correlations with the other four more widely-used asset classes — cash, fixed income, equities and investment real estate. (Note: Low and ideally negative correlations mean the prices of different assets do not move in tandem.)
Here is a rundown of the six segments comprising alts:
HEDGE funds are absolute return investment vehicles that attempt to generate positive nominal returns in all investment environments by taking both long (buy first, then sell) and short (sell first, then buy) investment positions. They are often deemed high risk and are not readily available in Malaysia. Purveyors of hedge funds, though, abound in more sophisticated financial centres, including Singapore and Hong Kong.
STRUCTURED products are hybrid offerings comprising a primary investment like a zero coupon bond and a riskier growth investment, such as a derivative (see derivatives below for an explanation), which can tie up capital for several years, namely the structured term or tenure. (My biggest complaint about structured products is not with their risk, but with the irritating, frustrating, widespread incorrect use of the word “tenor” for “tenure” (see www.usingenglish.com/forum/threads/27292-Tenor-vs-Tenure).
My linguistic pedantry aside, structured products can be far riskier than numerous naive retail investors are led to believe. They come in two flavours: structured deposits, which are relatively safer than their racier, riskier cousins, structured investments.
PRIVATE EQUITY are ownership stakes in private companies that are not (yet) listed on a stock exchange. Such stakes can be ideal wealth generators for sophisticated investors, who have both deep know-how and vast financial muscle. They require the know-how to assess the long-term prospects of various private companies and the muscle to invest in several private equity positions to spread their risk and raise the likelihood of enjoying at least one or two gushers within their extensive set of private ownership positions.
DERIVATIVES are securities that are essentially gambles. The fluctuating price of a derivative is based on (or literally “derived” from) the intermediate price movements of an underlying asset, such as a stock or index (like the KLCI or S&P 500) or a commodity. Each derivative is a contract between two or more parties. The contract’s settlement value hinges on the price of the primary underlying asset.
FOREIGN currency. As Malaysians, our base currency is the ringgit. Since ours is a minor currency within the global scheme of things, sophisticated investors sometimes take long positions in currencies they think will strengthen and short positions in currencies they suspect will weaken. The foreign currency or foreign exchange (forex) market is the world’s largest! Worldwide, the most traded currencies are the greenback, or US dollars, the euro, yen, British pound and Swiss franc.
COMMODITIES are real, tangible assets. In Scott Frush’s book Commodities Demystified, he explains: “Commodities... represent the food we eat, the fuel we use to power our automobiles, the metal we utili(s)e to make (jewellery) and the lumber we use to build our homes. Without commodities, our civili(s)ation would not exist today.” - NST
Economists are cautioned to predict what or when, but never both. While not an economist, I’ll heed this advice and predict what. The stock market will crash in dramatic fashion.
It’s inescapable. Central banks have driven rates into the ground. According to the WSJ, there is more than $11 trillion of debt with negative yields.
Lower yields in turn drive up asset prices. Stocks seem to break new highs on a regular basis. There’s talk of real estate bubbles forming again. It’s not surprising. With cash earning nothing, investors move their liquidity to other assets (e.g., dividend paying stocks) for yield.
Eventually the music will stop and investors will head for the exits. While I don’t know when it will happen or what will be the final straw that sets panic in motion, a significant correction will occur.
Here are several ways to prepare your portfolio for the inevitable.
1. Recognize Bear Markets are a Reality
In his book The Road Less Traveled, M. Scott Peck observed that life is difficult. But he didn’t stop there:
Life is difficult. This is a great truth, one of the greatest truths. It is a great truth because once we truly see this truth, we transcend it. Once we truly know that life is difficult-once we truly understand and accept it-then life is no longer difficult. Because once it is accepted, the fact that life is difficult no longer matters.
One can apply this to investing. Stock markets crash from time to time. If we recognize this in good times, we prepare ourselves for the difficult times.
The timing of a market correction is sometimes surprising. The crash of 1987 comes to mind. But the fact of a down market should never take us by surprise.
2. Check Your Asset Allocation
It’s been said that the more you sweat in peace, the less you bleed in war. The same is true with investing. It’s during a bull market that we should ensure that our asset allocation is both realistic and aligned with our financial objectives. The goal is to have in place an investment plan that we can stick with during a down market.
Here the primary focus is on the stock and bond allocations. This critical decision drives long-term returns and volatility more than any other asset allocation decision. The worst time to make significant changes to an investment plan is when equities are in free-fall. For those with at least 10 years left before retirement, an asset allocation of at least 70% in stocks is ideal. As you near retirement, the stock allocation often goes down. Even in retirement, however, keeping at least 50% in stocks is usually a good idea. Remember that at age 65, retirees are still planning on a 30 year retirement.
3. Examine Each Fund
Beyond asset allocation, we should examine each individual mutual fund or ETF we own. This is particularly true if you invest in actively managed mutual funds. A combination of high expense ratios and a falling market often cause people to sell actively managed funds at the wrong time. In fact, studies have found that investors in index funds were more likely to stick to their investment plan in difficult times then those who invest in actively managed funds.
4. Follow the 5-Year Rule
A good rule of thumb is not to invest any money in the stock market that you’ll need over the next five years. This is particularly important for those who are in retirement and relying on their investments for daily expenses. The goal here is to avoid a situation where you have to sell stocks during a bear market in order to meet living expenses.
This rule is difficult to follow today given the extremely low yields in the bond market. But given the relatively high prices of equities, it’s an important rule to follow. With at least 5-years worth of expenses out of the market, an investor is more likely to weather a bear market knowing their immediate needs are taken care of.
5. Stay Out of Debt
This last factor may surprise some because it has nothing to do with investing directly. It’s here that we take a holistic approach to our finances. You’ve probably worked through a questionnaire from a brokerage firm that’s designed to assess your appetite for volatility. These questionnaires tend ask questions such as what you will do if the stock market falls by 20%. What these questionnaires fail to address is the amount of debt that you have.
Why is that important? In my experience, those with little debt relative to their income and assets are more likely to weather a bear market. In contrast, those with a lot of debt relative to their income and assets are in a less stable financial position and more likely to flee the market in fear.
I put the question of how to prepare for a stock market crash to the Dough Roller Facebook community. There were many helpful responses. One member named Ryan offered sage advice:
My two cents would be that there isn’t any preparation (in terms of moving money) that needs to be done if you have already chosen your investment strategy. You simply have to ride out the lows to get to the highs. The market can’t be timed (let alone twice) so don’t try to sell at the top then buy at the low. Market crashes are part of the cycle and are unavoidable. That said, I think psychologically is where people could benefit from preparation. Simply educating yourself on market cycles and reading literary works (The Simple Path to Wealth by JL Collins) of much smarter people will keep your emotions in check better during a downturn than if you didn’t take these proactive steps.
The key is to prepare now for a falling market. In my case, I assume that the value of my portfolio will be cut in half during the next bear market. While that is extreme, it follows the old adage, prepare for the worst and hope for the best. - Forbes
MASASHI UEHARA, principal economist, and KENGO TAHARA, senior economist, Japan Center for Economic Research
TOKYO -- The U.K.'s decision to leave the European Union has cast uncertainty over key Asian economies, new Japan Center for Economic Research forecasts show.
The center on Wednesday published its fourth short-term outlook for five Asian markets: China, Indonesia, Thailand, Malaysia and the Philippines. Though the Brexit vote has had little immediate impact on these countries' stock prices and exchange rates, the decision is expected to depress growth through trade and the financial markets as the withdrawal approaches.
This year, China's economy is expected to continue decelerating, following the slowdown in 2015. The four major Association of Southeast Asian Nations economies are projected to tread water around their 2015 gross domestic product growth rates, with China holding them back.
Malaysia looks likely to feel the biggest effects from Brexit and the Chinese slowdown, with its real GDP growth rate falling to 4.1%.
Under the circumstances, Asian countries are expected to step up monetary easing, including interest rate cuts.
China's waning momentum
JCER projects China's real GDP growth rate in 2016 will slow to 6.5%, down 0.4 of a point from last year's 6.9%. The country is coming off its worst economic performance since 1990, in the wake of the Tiananmen Square crackdown the previous year. Real estate investment has underpinned growth in the first half of 2016, but sluggish capital investment -- long a main engine for China -- will hinder the economy. Last year's boost of the financial sector are bound to wear off this year.
In 2017, China's growth rate is projected to slow to 6.0%, with the European economy also taking a hit from Brexit.
In June 2016, Chinese private-sector investment lost momentum and its year-on-year growth fell to nearly zero. Meanwhile, investment by state-owned enterprises increased rapidly, sustaining overall investment growth. Investment in the real estate sector expanded in large coastal cities, and housing prices appreciated strongly. Corporate debt is swelling, mainly in the steel, shipbuilding and property sectors.
Since the global financial crisis hit in 2008, China has accumulated a great deal of corporate debt, with the ratio reaching 170% of GDP in the fourth quarter of 2015. That is above the level of Japan during the economic bubble years.
Looking ahead, China is facing reduced investment, an increase in defaults and depreciation of the yuan. The ratio of nonperforming loans is officially less than 2%, but the ratio of debts bearing interest greater than companies' profits is over 15%, according to the International Monetary Fund. The central government still has deep pockets, but it is important to monitor the risk of defaults fueling credit anxiety.
Malaysian risks
The 2016 growth rate for the four ASEAN countries remains at 4.6%, on a par with the 2015 figure. Weaker growth in Malaysia, compared with 2015, and a sluggish Thai economy should be offset by strong growth in Indonesia and the Philippines. Indonesia is seeing healthy domestic consumption, and expectations for the Philippines are rising now that this year's presidential election has come and gone.
Flat aggregate growth is expected in 2017, at 4.6%, due to China's slowdown and Brexit.
Malaysia is in for a pinch: The 4.1% annual growth projected for 2016 and 2017 is down from a relatively high 5.0% last year. The projected rate would be the lowest since 2009, when the global crisis sent the figure plunging to minus 1.5%.
Malaysia heavily depends on exports, which account for about 70% of its GDP. The ratio of exports to the U.K. and other EU countries as a percentage of GDP is just below 7% -- the highest among the four major ASEAN countries surveyed. Out of the four, Malaysia also has the most credit from British banks and makes the most direct investment in the U.K. This is why it is the most exposed to Brexit.
The Southeast Asian country's dependence on exports to China is also relatively high.
Since the introduction of a goods and services tax in April 2015, Malaysia's consumption has turned sluggish as well. The large household debt load means a quick consumption recovery is unlikely. Budget austerity will also weigh on investment.
Delayed U.S. rate hikes and the rise in crude oil prices will help to stem the ringgit's depreciation -- making a generally positive impact on Malaysia's fiscal balance and corporate earnings. But if the ringgit were to rapidly strengthen against the dollar, it would hamper already slowing exports.
Political risk must also be taken into account. Prime Minister Najib Razak remains shrouded in suspicion over a graft scandal dogging state-owned investment company 1MDB.
Turning to Thailand, exports under the military regime are slumping amid China's slowdown. The consumption recovery appears shaky. And private-sector investment is stagnating.
In 2015, Thailand mustered 2.8% growth, and the figure is expected to increase only slightly, to 3.0%, in 2016. The projection factors in a net export increase, since imports are shrinking more than exports. The Thai economy relies heavily on exports, with China accounting for a significant portion. Tourism is another key contributor, and a recent decrease in Chinese arrivals bodes ill for service exports. Chinese travelers make up just under 30% of total visitors to Thailand.
In Thailand, too, political risk is increasing ahead of a national referendum in August on a new draft constitution. The growth rate for 2017, when a general election is expected, is projected at 2.9%.
Relatively high growth can be expected in Indonesia and the Philippines, which are less dependent on external demand. Both countries are less susceptible to the influence of China and Brexit. In Indonesia, domestic demand, such as private consumption, is expanding steadily. As President Joko Widodo's government has become more stable, there is hope that deregulation will proceed smoothly, boosting growth.
Indonesia's growth forecast for 2016 is 4.9%, up 0.1 of a point from 2015, with another uptick to 5.0% expected in 2017. The actual rate of 4.8% in 2015 was the first below 5% since the collapse of Lehman Brothers in 2008.
The Philippine economy is expected to expand under the new administration of President Rodrigo Duterte, who took office at the end of June. Robust domestic demand is seen supporting consumption growth. This year, the economy is projected to grow 6.4%, up 0.5 of a point from 2015.
The government intends to accelerate infrastructure investment, and Duterte's other economic plans -- such as measures to attract foreign investment -- are worth watching. Growth is projected to remain brisk, at 6.4%, in 2017.
Stimulus ahead
In these uncertain times, many Asian countries have already executed monetary stimulus measures, such as interest rate cuts, and they are likely to strengthen those measures in the near future. Malaysia cut its policy interest rate by 0.25 of a point, to 3%, for the first time in about seven years on July 13 -- a few weeks after the Brexit referendum. Malaysia is expected to trim the rate further in the second quarter of 2017, but there is a chance it will do so again within 2016.
Indonesia reduced interest rates four times in 2015, and a further cut to 5% is expected in the fourth quarter of 2016. Thailand is seen making a cut to 1.25% in the fourth quarter of 2016, after reductions in both March and April last year. China is also expected to carry out a cut of 0.25 of a point, to 4.1%, in the fourth quarter of 2016. China lowered its key rate five times in 2015.
Last year, Asian countries faced currency depreciation in anticipation of higher interest rates in the U.S. That is not the case in 2016. In addition to currency stability, inflation rates are within the scope of official expectations. As a result, central banks are now well-positioned to cut rates.
Only the Philippines is expected to carry out a rate hike in the fourth quarter of 2016, to ward off higher inflation and prevent the economy from overheating. - Nikkei Asia Review
Bitcoin trade volumes have surged in Malaysia amid falling Ringgit and oil prices. Read more.....
The deteriorating global economic situation comes as a blessing to the popular digital currency Bitcoin. The activity in the digital currency market is known to be completely opposite to that of the conventional ones and Bitcoin has proven it yet again.
According to reports, there has been an increase in demand for the digital currency in Malaysia followed by the weakening Malaysian Ringgits. Last week, LocalBitcoins in Malaysia is said to have registered an all-time highest trade volume of over 737,218 Ringgits worth of Bitcoin, which is roughly around $182,000. Even though the volumes seem to be less compared to daily overall bitcoin volumes on the Bitcoin network, it is nevertheless a milestone for the country’s bitcoin community.
The sudden increase in demand for bitcoin in Malaysia is quite similar to the trends exhibited by the digital currency markets in Kenya, Russia, and Venezuela. All these countries have one thing in common, their weakening economies. The spike in Bitcoin demand across these regions has occurred almost at the same time.
Kenya registered an all-time high of over 10.5 million Kenyan Shillings worth of trading last week. During the same week, even Russia reported very high trade volumes amounting to over 185.25 million rubles (the second highest figure in Russian digital currency market so far).
The increased demand for Bitcoin among the Malaysians is attributed to recent developments in the Malaysian economy brought about by the investigation into 1Malaysia Development Bhd‘s involvement in embezzling and laundering funds through US banks. The call for an investigation into the government owned institution has led to reduced confidence in the country’s legal tender- Ringgit among the investors.
Malaysian Ringgit has registered a fall of over 2.7 percent in the last week along. The fall of Ringgit value, in addition to falling oil prices, has had a considerable impact on the country’s economy. This has driven investors to look into alternative investment options, including Bitcoin in the recent days.
Bitcoin continues to be the safe haven asset for many people across the world and we can expect the demand to further increase in the coming months as many economies continue to falter. - newsbtc
Related - Bitcoin Thrives in Malaysia
Bitcoin trading is going through peaks and lows everywhere in the world at some point in history. Over the past few weeks, however, some countries seem to show an increased interest in this cryptocurrency. Particularly Malaysia stands out, although that is not entirely surprising, given their stance on easing Fintech regulation in general.
Malaysia is one of those countries where people are flocking to alternative investment solutions. Anyone who has been keeping an eye on the financial situation in that country will know things are not looking good. Money laundering is running rampant in Malaysia these days, and some of the major banks and investment funds are involved in the process.
Bitcoin Can Thrive in Malaysia
Earlier this week, news broke about the 1Malaysia Development Bhd, which is a state-owned fund, being involved in embezzlement and money laundering. Although many experts felt something was up with 1MDB for quite some time, they were never able to make these claims stick.
According to some sources, 1MDB laundered US$1bn of misappropriated funds through banks in the United States. Once again, this is another example of why banks cannot – and should not – be trusted by anyone. The financial ecosystem we know facilitates money laundering and embezzlement, and this situation has been going on for quite some time now.
This international investigation has got the press on high alert, bringing more scrutiny to the Malaysian economy than ever before. Combine this unwanted attention with low oil prices, and the situation is quickly deteriorating. Investors are losing confidence in traditional investment opportunities, as the state and banks control the majority of them.
All of this is creating plenty of possibilities for Bitcoin adoption to thrive in Malaysia. While the banks and financial institutions are scrutinized by law enforcement, the general Fintech ecosystem is booming. Moreover, the government recently decided to ease off on regulating these startups, which is positive news for Bitcoin in Malaysia as well.
LocalBitcoins charts go to indicate there is a growing demand for Bitcoin in Malaysia as we speak. The demand for Bitcoin has been growing steadily over the past few months, and bigger spikes are noted on the charts If this trend continues, Bitcoin seems prime for a major price boost in the coming weeks. - livebitcoinnews
