Investors should consider increasing their holdings of safe-haven assets such as gold as there is less of an opportunity cost in holding the precious metal compared with bonds in the current low interest rate environment. This is one of the key drivers of gold prices in the short to medium term, according to the World Gold Council’s (WGC) 2019 Annual Review.
The low interest rate environment may even provide the precious metal with a positive “cost of carry” relative to sovereign bonds, says the Feb 24 report. A positive cost of carry is where the income generated from an investment is higher than the financing or holding costs required to hold that position.
“Unlike bonds, gold does not pay interest or dividends because it does not have credit risk. This perceived lack of yield often deters some investors. But in an environment where a quarter of the developed market sovereign debt is trading at negative nominal rates — and once adjusted for inflation, a whopping 70% of trades with negative real rates — the opportunity cost of gold almost goes away,” says the report.
Historically, gold has performed well in the year following shifts in fiscal policy, from tightening to “on hold” or “easing”, it adds. Whenever real rates have been negative, the precious metal has generated twice as much returns annually as the long-term average.
“Even low positive real rates produce higher average returns. Effectively, it has only been in periods with significantly higher real interest rates — an unlikely outcome, given the current market conditions — that gold returns have been negative,” says the report. “This is further supported by the surge in negative real-yielding debt as evidenced by the strong positive correlation between the amount of debt and price of gold over the past four years. To some degree, this illustrates the erosion of confidence in fiat currencies related to monetary interventions.”
The current landscape has pushed investors to increase their portfolio risk by buying longer-term bonds, lower-rated riskier bonds or simply replacing them with riskier assets such as stocks or alternative investments. This environment makes gold more effective than bonds at mitigating stock-market risks, providing portfolio diversification and helping investors achieve their long-term investment objectives, says the report. Hence, investors have been steadily adding gold to their portfolios.
According to the report, central banks bought the most gold in history in 2018. They continued their robust purchases in 2019 and were net buyers of the precious metal for a 10th consecutive year.
Global gold reserves grew 650.3 tonnes last year, the second highest annual total in 50 years. A total of 15 central banks — all in emerging markets — increased their gold reserves by at least one tonne, highlighting the breadth of buying, says the report.
Gold-backed exchange-traded fund (ETF) holdings reached an all-time high as global investors responded to the high-risk, low-rate environment. Investments in these products increased by 401.1 tonnes in 2019, up 426% year on year. North American funds saw the most substantial net increase at 206 tonnes, followed by European funds with 188 tonnes. “The very low interest rates worldwide will likely keep stock prices high and valuations at extreme levels. Within this context, we believe there are clear reasons to have higher levels of safe-haven assets like gold,” says the report.
Softer consumer demand
Consumer demand for physical gold declined by 11% last year, says the report. Global demand for gold jewellery fell 6% to 2,107 tonnes while retail investments slumped to a 10-year low. Gold demand across the board fell 1% to 4,355.7 tonnes in 2019 as the price-driven slump in consumer demand matched the surge in investment inflows into gold-backed ETFs. The report describes this softer consumer demand as a by-product of geopolitical, macro-economy and monetary policy uncertainties, which resulted in gold price volatility. Higher gold price volatility combined with expectations of weaker economic growth have resulted in softer consumer demand for gold in the near term.
According to the report, consumer demand still accounts for a significant portion of the total annual demand for gold, an average of 75%. Based on the multi-country survey of 18,000 people, gold ownership levels are high and many respondents displayed a keen interest in investing in gold.
However, 38% of the respondents had never bought gold before, but were considering doing so in the future. That is because about a quarter of them were concerned about mistakenly buying counterfeit gold and that the purity of the yellow metal purchased is not guaranteed. The report points towards gold-backed ETFs as a growth area going forward. The holdings of gold-backed ETFs closed the year at 2,885.5 tonnes, with monetary easing and geopolitics being the main drivers of this demand in 2019 coupled with the price rally, which drew some momentum inflows. About 40% of retail investors cited ease of purchase as a key requirement when investing in gold products. Last year, 26% of retail investors globally invested in gold-backed ETFs via online platforms, compared with only 9% and 6% in gold coins and jewellery respectively. As at Jan 31, the largest gold-backed ETF in the world — SPDR Gold Shares — had generated an annualised return of 19.25% for the past year and an annualised return of 8.88% for the past three years.
Gold versus climate change
According to the report, gold is likely to play an increasingly important role as investors consider how to adjust their portfolios to account for a climate-impacted economy. In another report, titled Gold and Climate Change, also released by the WGC, it was estimated that the total value of global investment portfolios would likely fall between US$4.2 trillion and US$13.9 trillion due to inaction on climate change. This report includes a study conducted by the WGC to assess and evaluate climate-related implications on asset classes based on their sensitivity to risk factors and scenario pathways. In its findings, gold is likely to exhibit a relatively robust performance across all climate scenarios in relation to other asset classes such as equities and real estate, due to their traditional role and safe haven qualities.
The report also points out that unlike most metals, the demand for gold is diverse and does not concentrate in any particular sector or geographic region. It also has cultural significance as a luxury good and monetary asset.
Climate-related physical risks are less likely to threaten the relative stability of the overall gold supply, which is likely the case for most other commodities, says the 2019 Annual Review. “In contrast to many other mainstream asset classes, gold is likely to be more resilient and less volatile as climate change impacts the global economy. “While there is more to do to fully understand how to construct an investment portfolio that is robust, given a changing climate, it is evident that gold will play a leading role, particularly given that ongoing emissions associated with gold bullion are negligible.”
According to the WGC’s analysis, the total carbon emissions associated with the global gold market is equivalent to the global economy as a whole, with the vast majority of emissions concentrated in the gold mining phase. Other emissions associated with gold are limited to the transformation of gold ore into bullion and then into jewellery and other fabricated products such as bonding wire for electronics. This makes gold different from other commodities, of which the scope of emissions can be significant.
“Climate change is recognised not only by companies but also their investors and clients as being material to operations and of potential impact on both the asset and liability sides of their balance sheets. Financial regulators are increasingly formalising these requirements for greater disclosure, with the expectation that investors will consider the materiality of climate-related risks as a core component of their fiduciary duties. There are strong indications that climate-related financial disclosures are likely to become mandatory over time,” says the report.
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Malaysia’s richest tycoons have lost an estimated RM30.93 billion since the start of this year, based on their known shareholdings in Bursa Malaysia-listed firms, as pandemic-driven panic selling across global markets sparked an equity rout that has yet to see an end.
Of the 10 richest men in Malaysia, Hong Leong Group’s Tan Sri Quek Leng Chan — who stands at No 2 on the latest 2020 Forbes Malaysia Richest List that was released earlier this month — lost the most in the past 12 weeks.
Based on shares he holds in seven companies, in particular Hong Leong Bank Bhd (HLB) and Hong Leong Financial Group Bhd (HLFG), Quek saw RM11.87 billion worth of paper losses. Quek has a 62.1% stake in HLB, whose share price has sunk 27% year to date (YTD). As a result, he lost RM6.21 billion. Quek also holds 78.51% of HLFG, which has also fallen 27% YTD, resulting in his investment value declining by RM4.05 billion.
After Quek was gaming tycoon Tan Sri Lim Kok Thay, who saw his wealth shrink by almost RM8 billion, as the three Genting Group stocks on Bursa — Genting Bhd, Genting Malaysia Bhd and Genting Plantations Bhd — have been battered.
The biggest chunk of Lim’s losses — some RM4.03 billion — came from his 44.62% stake in Genting, which has dropped 43% YTD. This is followed by RM3.4 billion from Genting Malaysia, in which he controls 49.9%. Then, from his 54.49%-held Genting Plantations, Lim lost a further RM547.51 million.
If not for a slight rebound seen on Bursa last Friday, Lim would have lost RM9.39 billion (based on the stocks’ closing price last Friday) from the shares he holds in these three companies. The tycoon who saw the third biggest loss YTD was Public Bank Bhd founder Tan Sri The Hong Piow, as the bank’s stock fell 26% YTD and caused him some RM4.5 billion loss in investment value.
Teh holds 23.41% of Public Bank, which has always been seen as the most solid banking stock in the domestic market. He also holds 44.19% of insurer LPI Capital Bhd, which saw a similar drop in share price that cost him another RM678.63 million.
This means Teh lost a collective RM5.18 billion YTD from his investments in these two companies. Next came Sabah tycoon Tan Sri Lau Cho Kun, who holds 73.91% of Hap Seng Consolidated Bhd. He lost about RM4.56 billion on paper as the company’s shares declined 25% YTD. After Lau, IOI Group’s Datuk Lee Yeow Chor recorded the next biggest loss, with an estimated RM3.91 billion gone from his investments.
The group managing director and chief executive officer (CEO) of IOI Corp Bhd lost an estimated RM2.68 billion from the palm oil company, in which he holds 48.29%. He also lost another RM1.22 billion from his 63.62%-owned IOI Properties Group Bhd.
Next was Malaysia’s third richest man Ananda Krishnan, who lost an estimated RM2.56 billion. This came from telecommunications company Maxis Bhd where he holds 62.34%; media firm Astro Malaysia Holdings Bhd in which he controls 41.29%; and oilfield services-provider Bumi Armada Bhd where he has 34.86%. The bulk of his losses, some RM1.16 billion, came from Astro, as its share price has sunk 43% YTD. While shares in Maxis have only dipped 2% YTD, Bumi Armada’s shares plunged by as much as 75% to close at 14 sen last Friday.
The tycoon with the eighth biggest loss YTD was Tan Sri Paul Koon Poh Keong, the CEO and co-founder of now Southeast Asia’s largest aluminium smelter Press Metal Aluminium Holdings Bhd.
Koon lost a collective RM2.24 billion, comprising RM2.21 billion from his 39.67% stake in Press Metal, and another RM24 million from the 24.02% he holds in PMB Technology Bhd.
Last on the YTD loss-making tycoons list is Robert Kuok Hock Nien, the richest man in Malaysia. He only lost some RM2.01 billion via his shareholdings in PPB Group Bhd (50.81%) and Shangri-La Hotels (Malaysia) Bhd (75.81%). He lost RM1.95 billion from PBB and RM56.7 million from Shangri-La.
The only winner from Malaysia’s 10 richest list in the past 12 weeks is Hartalega Holdings Bhd’s founder and executive chairman Kuan Kam Hon, who earned RM1.94 billion on paper as the world’s largest nitrile glovemaker’s shares surged thanks to higher demand for rubber gloves amid the spread of the pandemic.
YTD, Hartalega’s shares have climbed 21% to close at RM6.62 last Friday, with a market capitalisation of RM22.39 billion.
Led by Kuok, Quek and Ananda, the 2020 Forbes Malaysia Richest List ranks Cambodia-based NagaCorp’s Tan Sri Dr Chen Lip Keong as the fourth richest, followed by Teh, Lee, Lim, Koon, Kuan and Lau.
With the Movement Control Order in full force to stem the spread of the deadly Covid-19 outbreak, there is growing concern that working from home will negatively affect the operation of many businesses.
But here’s your chance to show your boss that working from home is viable, especially during difficult times like these. The first step will be to pick an organisational system that fits your job. It does not have to be fancy as long as it helps you stay organised while managing your time effectively.
They are great for sorting out your responsibilities as well as your to-do lists, mind maps, calendars and document storage clouds.
1. Get organised • Trello This software allows you to visualise and effortlessly track all your work. The layout is aesthetically pleasing and in an intuitively understandable card-based form. You can add, edit notes, files and highlights. Even if you relocate, work progress can be tracked by using Trello.
• Google Docs
Google Docs is a great tool for sharing documents across multiple people. You can opt for the document to either be public or private and allow users to edit it. The best feature of Google Docs is that it allows multiple users to simultaneously edit the document which is great for collaborative work. • Canva Canva is an online graphic design suite for designers and non-designers. This tool boasts an extensive collection of templates from posters, business cards and banners. If you are looking for an organisational chart-maker, Canva can help with creating an organisation structure while being consistent with the company’s brand identity.
2. Establish your goals
The main pillar towards building a work-from-home schedule is clarifying and understanding your goals. Determine what the main goal is that you must achieve and whether it’s on a monthly, weekly or daily basis. Without goals, you wouldn’t know what you need to accomplish and will most likely end up wasting your time. A well-defined pathway can help you organise your work schedule to ensure you can properly balance your work and personal time during the work-from-home period.
3. Allow flexibility in your work schedule
A little flexibility is an essential part of your work schedule, especially if you also have to care for their kids or have errands to run during the day. There are two different approaches to take. Either you give yourself some lead time on your work so you don’t have trouble taking time off for personal matters or you give yourself an hour or two of personal time. 4. Utilise a time-tracking app Tracking your time can be useful in determining if you are actually working efficiently or not. To reliably keep track of your work hours, try out Clockify.me or Toggl.com.
5. Delegate time for exercise
A 30-minute workout routine is essential in keeping you fit and energised so you stay on track with your daily schedule. Falling sick is the last thing you would want to deal with. Adding a physical workout routine can also help break the monotony of work and most importantly keeping you healthy and fit. 6. Maximise your time when you’re at your most productive Attempting to work from morning till evening is ill-advised.
It’s best to capitalise on your most productive periods by prioritising on more important tasks.
Use your slower points of the day to focus on minor tasks.
During today’s White House coronavirus task force press conference, President Trump announced the launch of a new public/private consortium to “unleash the power of American supercomputing resources.” The members of this consortium are the White House, the Department of Energy and IBM . Other companies, including Google, Amazon and Microsoft, as well as a number of academic institutions, are also “contributing lots of different things,” the president said.
While Trump’s comments were characteristically unclear, IBM provided more details, noting that it is working with a number of national labs and other institutions to offer a total of 330 petaflops of compute to various projects in epidemiology, bioinformatics and molecular modeling. Amazon, Google and Microsoft are also part of the consortium, which is being led by IBM, the White House Office of Science and Technology Policy, and the Department of Energy.
IBM and its partners will coordinate the efforts to evaluate proposals and provide access to high-performance computing resources to those that are most likely to have an immediate impact. “How can supercomputers help us fight this virus? These high-performance computing systems allow researchers to run very large numbers of calculations in epidemiology, bioinformatics, and molecular modeling. These experiments would take years to complete if worked by hand, or months if handled on slower, traditional computing platforms,” writes Dario Gil, IBM’s Director of Research.
AWS has already dedicated $20 million to support COVID-19 research while Microsoft has already announced a number of different initiatives, though mostly around helping businesses cope with the fallout of this crisis. Google has now launched its own coronavirus website (though it’s very different from the one Trump once promised) and Alphabet’s Verily is helping Bay Area residents find testing sites if needed.
After today’s announcement, the White House shared statements from Microsoft, Google and other partners. “We know that high performance computing can reduce the time it takes to process massive data sets and perform complex simulations from days to hours,” said Mike Daniels, Vice President, Global Public Sector at Google Cloud, in his statement. “We look forward to participating in this initiative alongside leaders in technology, academia, and the public sector to make more resources available to COVID-19 researchers and to apply Google Cloud computing capabilities toward the development of potential treatments and vaccines.”
Similarly, Microsoft’s global head for its AI for Health Program, John Kahan, notes that Microsoft wants to “make sure researchers working to combat COVID-19 have access to the tools they need” by expanding access to its Azure cloud and by creating more opportunities for researchers to collaborate with the company’s data scientists.
“Today I’m also announcing the launch of a new public/private consortium organized by the White House, the Department of Energy and IBM to unleash the power of American supercomputing resources to fight the Chinese virus,” Trump, who continues to insist on calling COVID-19 ‘the Chinese virus,’ said in today’s press briefing. “The following leaders from private industries, academia and government will be contributing and they are gonna be contributing a lot of different things, but compute primarily — computing resources to help researchers discover new treatments and vaccine. They will be working along with NIH and all of the people working on this. But tremendous help from IBM, Google, Amazon, Microsoft, MIT, Rensselaer Polytechnic Institute, the Department of Energy’s, the National Science Foundation and NASA. They are all contributing to this effort.” |
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