Risks of ICO investing
THIS week, a financial technology (fintech) company called HelloGold said it is shutting down its operations in the country and Thailand.
There is nothing untoward about this development, as startup companies often do not get to a size big enough for them to make an impact.
This is why investing in startups is usually best left to people more familiar with the risks it entails, such as venture capitalists (VCs) or angel investors, who typically have had the experience in running such tech firms.
HelloGold had an attractive plan to democratise investing in gold, allowing investors to make small investments, and lowering the fees that traditional financial institutions charge when customers buy their gold-linked investment products.
What is interesting about HelloGold is that in 2017, it did an initial coin offering or ICO, where digital tokens were sold to investors.
What fate lies for those investors remains unclear, but it is most likely that their investments are hardly worth anything today.
The issue also is what rights are attached to the digital tokens that are sold in ICOs?
This again is vague and jurisdictions around the world have varying views on this, not to mention that ICOs are still banned in many countries.
So, does that make investing in traditional stocks listed on regulated exchanges any safer?
On the one hand, it should be noted that even stock prices can crash to zero. But there are safeguards.
For one, public companies are required to provide periodical reporting on their performance. Their books need to be audited by authorised auditors.
In short, there is a plethora of rules and regulations that listed companies need to adhere to, which companies launching ICOs do not do so.
To be sure, for some market regulators which are allowing ICOs, they are putting in place similar disclosure requirements on the token issuers.
But until all that is ironed out and tried and tested, investing in these startups promising to captialise on blockchain technology should probably be left to the expert investors such as VCs.
CPO price benchmark
FRESH from last year’s episode of its palm oil export ban to erratic levies and duties, Indonesia, the world’s largest crude palm oil (CPO) producer, now plans to establish its own CPO price benchmark, possibly by the middle of this year.
This move is seen to rival Malaysia’s CPO Futures (FCPO) contract prices traded on Bursa Malaysia Derivatives Bhd (BMD) – the global CPO price benchmark widely used by traders, exporters, fund managers and financial institutions for managing price fluctuations in the market.
In fact, it is the most liquid and successful CPO futures contract in the world, consolidating Malaysia’s position as the global centre for palm oil price discovery.
In 2022, FCPO posted a record 16.2 million contracts, surpassing 15.6 million contracts in 2021 – thanks to higher foreign participation.
Hence, for Indonesia to go about challenging FCPO, it will all depend on how closely it follows the pricing on BMD, given the different domestic pricing.
One likely scenario is that Indonesia’s CPO price benchmark, if proven to be attractive, could definitely take away the strong volumes traded by FCPO on BMD and eventually, may even become the future reference global benchmark pricing for CPO.
Its trading is also expected to be more volatile than FCPO BMD movements. But for this to happen, it will take quite some time to set in and gain traction.
Notwithstanding this, it is only to be expected for Indonesia to be making all the right moves since Malaysia has long “lost” its CPO global leadership, particularly in planted areas since 2006.
Indonesia, meanwhile, is trailblazing ahead with its significant CPO production, volumes and exports.
In this challenging development, why is Malaysia, which exports 90% of its palm oil abroad, still complacent with no concrete long-term strategies by way of new policies and reinvestment in ensuring its palm oil sector’s resilience and competitiveness in the global arena?
Perhaps, this question is best posed to the relevant authorities, namely, BMD, the Plantation and Commodities Ministry, the Malaysian Palm Oil Board and the Malaysian Palm Oil Council, among others.
Inflation concerns
THE volley of comments over the cost of living has been dominating headlines in recent weeks. Food inflation has been the more touchy topic of the variety of issues now gripping Malaysians.
Malaysians have been battling higher prices of essential goods for sometime with the price of chicken and eggs prominently at the forefront of discussions.
Both these goods are critical for Malaysians. It is the one protein we are self sufficient in and the cheapest staple protein sources.
But Malaysians have been battling higher inflation in food and the government has said it has spent RM2bil to keep the price of chicken and eggs stable. Given the higher cost of products not just here but globally, the tug-of-war between higher prices and subsidies will continue as long as there is pressure on food prices to keep going up.
Food inflation was at 6.8% in December compared with the overall inflation rate of 3.8%, which shows that prices affecting everyday calories are still at an elevated rate.
The issue at hand now is the question of affordability. Malaysian wages have been kept low, thanks in part to the continued stream of cheap unskilled foreign labour keeping wages suppressed in the country.
As a result, even a minimum wage of RM1,500 a month had to be postponed for companies employing fewer than five people.
This means employees of such small companies cannot even get a wage that is above the national poverty rate.
This, in turn, is forcing the government to keep subsidising essential foodstuff and this burden will not be solved even if we increase food crop production in the country. This is now a situation of insufficient wages to pay for goods and services that are ever increasing in price in the country.
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