Building capital for a business venture isn’t always easy, especially when such venture will cater to a niche market. In rapidly developing Asia, entrepreneurs have begun seeking non-traditional options to finance their startups, adapting the same trend that made the West the economic powerhouse that it is now. As a result, there is currently an alternative financing revolution happening in the region. Here are more insights from Forbes:
As alternative financial products gather momentum, China’s state-controlled banks are losing share of the nation’s 44.8 trillion yuan in household deposits. The same can be said for many major Asian banks. Photographer: Brent Lewin/Bloomberg
In more ways than one, alternative finance has made borrowing simple, swift and suitable. Over the last few years, alternative finance providers have grown in number and garnered significant acknowledgement and traction from stakeholders such as regulators, venture capitalists, banks, enterprises and investors. They provide financing outside the parameters of traditional lenders, most commonly banks. Breaking it down even further, alternative finance includes domains such as crowdfunding, peer-to-peer financing, and invoice financing.
The rise of alternative lending
The sudden rise of alternative finance can be attributed to two reasons. First, the inability of traditional financial institutions to cater to certain segments of the market which need access to secure financial services. And second, because fintech firms have recognized these gaps, successfully experimented and developed solutions to fix these gaps with minimal red tape. Based on data from The World Bank, more than 200 million micro, small and medium-sized enterprises (MSMEs) in emerging economies lack adequate financing, due to lack of collateral, credit history and business informality. Until recently, alternative finance platforms have witnessed staggering success and even reached a stage of maturity in the Western markets, particularly in the U.K and U.S.
In recent times even the East has also joined the ranks and given the alternative finance industry a major boost. Countries such as China, Singapore, Hong Kong, and most recently Indonesia, Malaysia, the Philippines, and India have displayed a tremendously positive response to several platforms providing alternative forms of finance to enterprises and individuals. Rightly so, as Asia is home to a population of 4.4 billion and 5 key financial centers of the world. Aside from a considerably large consumer base and a relatively stable political system, most of the Asian economies emerged from the 2008/09 financial crisis in better shape than its western counterparts. The tightening of credit across several banks across the region has played a pivotal role in the growth of alternative finance in these markets.
A special mention must be made of the Asian regulators which are actively encouraging and supporting the growth of alternative finance in their respective countries. Singapore’s regulator has set aside $225 million to develop and support fintech projects locally. It has also eased the rules for financiers to increase the level of unsecured lending. The Monetary Authority of Singapore has even housed an innovation lab called Looking Glass within its building. Hong Kong Monetary Authority has created a system which brings banks, financial technology platforms and the regulator itself to collectively brainstorm and experiment on developing innovative solutions. In the same manner, China has become the largest P2P market regionally thanks to its government which encouraged the growth online finance to cater to the underserved market instead of solely relying on local banks. Japan has taken a step further to collaborate at an international level by partnering with the Financial Conduct Authority to encourage a cooperation between financial technology platforms in Japan and in the U.K to be able to operate in both countries.
Different nations around the world follow specific taxation laws that must be carefully observed by their citizens; else, they will face legal consequences. Managing and understanding taxes can be challenging enough but imagine if you’re moving to another country. What are the things that you, as a non-citizen, should know when it comes to paying taxes?
More specifically, if an individual decides to move to another country either for work or to start a business, are they required to answer to their home country’s taxman and again pay taxes in the country in which their income or profit was made? Perhaps everyone can agree that this is inequitable and unfair. This is where double tax agreements (DTAs) come in.
Many countries including the United States make bilateral double taxation agreements with each other. In fact, the U.S. cover income tax treaties with an impressive number of foreign nations. This agreement ensures that alien residents and non-citizens either enjoy tax reduction rates or be exempted from U.S. income taxes on specified items of income they gained within the U.S.
Under this agreement, there are instances in which taxes should be paid in the country of residence but will be exempt in the country in which the gain was made. Other cases however require the opposite, and taxpayers can receive a foreign tax credit in the country where they currently reside as a form of compensation and a proof that tax has already been paid. However, this is only possible if an individual legally declares a non-resident status.
It should be noted that U.S. tax treaties include a “saving clause” to prevent individuals from the partner country who are legal citizens or residents of the U.S. from using this agreement to reduce their U.S. tax liabilities.
For most people, horse racing is an ultimate game of luck—but that’s not entirely true. Anyone in the horseracing business will agree that luck is just a part of the larger equation in balancing risks and returns in this kind of venture.
Image source: sportshaze.com
So how much does it cost to own and sustain a thoroughbred horse?
An average of $45,000 a year should be spent not only to train but to maintain a racehorse, at least in popular horseracing regions like Southern California. Here’s a quick breakdown:
The biggest expense will be in your horse trainer’s daily rate. For instance, experienced trainers have quoted a $95-$120 salary range. This amount will cover vitamins, supplies, feeding and bedding costs, groomers, exercise riders, and pay the necessary taxes depending on which state you live in.
On top of your trainer’s day fee, you’ll also have to consider veterinarian bills that can range from two hundred to a thousand dollars. In addition, a healthy horse also needs new shoes put on every four to five weeks and expect a monthly cost of $100-$200.
Jockey fees can be from $40-$500 for small races and big races, respectively. In addition, if the horse is lucky enough to win (place or show), jockeys take a percentage of the winnings.
Lastly, horse owners should also take transportation fees into account and shoulder other expenses for licenses, taxes and insurance. All can vary by state
Image source: thebusinessadvices.com
Racehorse ownership is relatively expensive so the question that needs to be addressed now is: is it all worth it? Well, horseracing success stories are rare but they happen. For instance, the 2017 Kentucky Derby Purse reached an approximately $2M dollars. Normally, a winning horse takes 60% of the purse for a first place, second place is 20%, and the third spot gives you 12%.
As Warren Buffet puts it, value investing’s central contention is summed up in the maxim, “Price is what you pay. Value is what you get.” Know more by reading this article on Investopedia:
Tuesday, May 9 marks the 123rd birthday of the late Benjamin Graham, who is commonly known as the “father of value investing.” How would he feel if he could survey the value investing landscape today?
He might be pleased to hear that his disciple Warren Buffett, who has hailed Graham’s 1949 book “The Intelligent Investor” as “the best book about investing ever written,” shepherded Berkshire Hathaway Inc. (BRK-A, BRK-B) to a 1,972,595% return from 1964 to 2016 (compared to the S&P 500’s 12,717%).
But Graham would also have plenty of cause for concern: according to a recent paper by U-Wen Kok, Jason Ribando and Richard Sloan, value investing is in a bad way
“Formulaic Value Investing”
In 1934 Graham and David Dodd wrote that thinking about book value – a firm’s net assets – as being the same as intrinsic value is “almost worthless as a practical matter.” To be sure, book value is one of value investors’ favorite metrics; Buffett lists Berkshires’ return in terms of book value (884,319% since 1964) right alongside its share price return. But Kok and her colleagues point out that self-described value investors increasingly content themselves with analyzing a firm’s value using book value alone or in combination with a few other narrow metrics, such as trailing earnings per share (EPS) or expected ones.
Such “formulaic value investing” tends to select firms with inflated fundamentals, the authors find, rather than underpriced shares. Value investing has “taken on a meaning we don’t think Graham and Dodd intended,” Ribando told Investopedia by phone Monday. And people are losing out on potential gains as a result.
Consumption of new and emerging technologies is higher than ever, helping the technology sector successfully win the race for the world’s top industry based on market size and total revenues. Leading tech companies are especially powerful, with each of their avid customers gobbling up every single release that is made available in stores. Just a single glance at the stock market, one can clearly see that the industry as a whole has been having a happy 2017, so far.
NASDAQ overall has gained 9.8 percent since January, while the Dow Jones Industrial Average settled in at 4.5 percent. The S&P 500 Information Technology Sector posted a 12.5 percent growth for the first quarter of 2017, making it the undisputed leader among all sectors. It is followed by Consumer Discretionary (up 8.45 percent), Health Care (up 8.37 percent), Energy (down 6.68 percent), and Telecom Services (down 3.97 percent).
Ever since Donald Trump has been elected president of the United States, the world economy has been plagued with doubt and uncertainty. That is why investors are flocking to IT companies because they are relatively unaffected by tax cuts and interest rates, apart from the fact that people are just plain hungry for innovations. Furthermore, if ever deregulatory moves and lowered business taxes materialize, those types of companies will benefit from them the most.
The top tech stocks
While the FANG (Facebook, Amazon, Netflix, and Google) group are the obvious frontrunners in the tech sector, they are not necessarily the best performers for the last three months. Semiconductor companies performed quite more impressively.
Micron Technology takes the biggest slice of the cake, exhibiting a first quarter stock performance of plus 32.3 percent with a market cap of $31.97 billion. Their performance was truly remarkable, but those numbers are about to get even bigger later this year as the demand for NAND and DRAM chips are expected to rise even further.
In close second is Skyworks Solutions. They are just nearly 1 percent behind the leader, closing the first quarter at plus 31.4 percent. They are the ones who will be providing chips to the up-and-coming iPhone 8 and Samsung Galaxy 8. Once those phones make their debut later this year, the company will surely be able to make a killing.
Just like Skyworks, Qorvo has close ties with Apple for they are the primary supplier of the radio frequency semiconductors that are being used in iPhones. Just like its predecessor, they are also set to benefit from the upcoming sale of Apple’s newest product, the iPhone 8. Their first quarter performance was pinned at 30.1 percent with a market cap of $8.83 billion.
Optimism about the highly regarded Ryzen CPUs led to the gains that Advanced Micro Devices experienced. They did great with a 28.3 percent first quarter performance. Their market cap on the other hand was valued at $14.04 billion. Once the CPU is officially released, AMD’s earnings and revenue will certainly skyrocket, even surpassing expectations.
Tech companies are definitely performing strongly overall. Looking at the biggest winners for the past couple of months, it is clear that semiconductor and microchip companies are on the higher end of the spectrum, and further growth toward the end of the year is highly probable. Higher demand coupled with strong earnings will be the primary drivers. The industry’s future is shining very brightly that it is blinding.
How do we minimize, if not eradicate, income inequality? Is a major tax reform really the best solution to address such issue? Read this article on The Telegraph for some insights:
We need more superstar companies like Apple which will make more rich employees | CREDIT: JUSTIN SULLIVAN/GETTY IMAGES
Income tax rates of 50pc or more; a mansion tax and far higher inheritance and wealth taxes; more generous benefits to redistribute wealth to the poor – there are lots of ideas out there about how we can reduce inequality, and just about all of them involve a bigger role for the state.
But hold on. Is that really the right direction?
Some of the latest research suggests that what we really need is more competition.
Why? Because the only reason inequality has been rising in most developed countries is because a small group of “super-star” companies have broken away from the pack and kick-started dramatic rises in productivity and pay for their staff.
If that is true, then the only fix is to encourage more of those stars – and a tough, free-market competition policy is the best way to do that.
Analysts are divided on how markets might turn out under the Trump administration. From overhauling the tax code, to repealing the Affordable Care Act and renegotiating trade deals, Trump’s plans can have massive implications for businesses, consumers, and investors. Uncertainty remains high as the new president has never been in public office. In other parts of the world, meanwhile, similar dilemmas exist. The likes of Brexit, Abenomics, the ongoing refugee crisis, and the deceleration of growth in China, among others, are major concerns that can have direct impacts on the various segments of the global economy. As such, portfolios need to be more resilient, adaptable, dynamic, and diverse. Investing internationally, with focus on emerging markets, then becomes a viable option.
Diversification and access to rapidly growing companies
Stock markets all over the world were not made equal. They behave differently at various points of the economic cycle and across numerous geographic regions. A stock market in Asia might be bullish, but that does not mean that its European counterpart enjoys the same. Investing internationally offers portfolios an additional layer of protection from volatility in individual markets.
Of course, many of the world’s best companies are in the U.S., the U.K., Japan, or Germany, making these markets great avenues to grow money on the long term. However, in some other countries, ‘less known’ businesses are showing great potential into becoming the next Amazon, Volkswagen, or Samsung. These companies are equally innovative but are yet to reach their economic peak.
In emerging markets, growth has so far been stronger than that of mature, developed markets. In 2015, Myanmar posted a GDP growth of 7.00 percent, Uzbekistan at 8.50 percent, and Ethiopia a whopping 10.20 percent. By comparison, the United States only grew by 2.60 percent and Japan by 0.60 percent in the same period.
For those investing in bonds, some countries offer much higher interest rates than others. Figures can have stark differences, especially versus developed markets where yields have been pushed down to historic lows, reflected in not-so-impressive income.
Sustainable economic growth is largely anchored on a healthy, educated, and productive workforce. However, as in the case of Japan, the ageing population is making a significant impact on areas such as social welfare, public health, and economic prosperity. The likes of Canada, Germany, France, and many other equally prosperous countries have a median population age of older than 40 years old. This may translate to higher spending on healthcare and increased dependence on the relatively smaller young working population to drive growth.
Newly industrialized countries like the Philippines, Iran, Mexico, and Turkey (who all belong to the Next Eleven Economies) have relatively young workforces, allowing for a potentially more ambitious and energetic manpower. A demographic sweet spot is expected to accelerate economic growth in these countries. To further emphasize just how important it is to have a predominantly young labor pool, many of today’s most successful entrepreneurs are considered millennials—and most of them have great contributions to the rapidly digitalizing world.
The Bottom-line
Investors who limit themselves to investing in just one country are missing out on a world of opportunities. Fortunately, there are offshore financial services companies that can help investors expand their horizons and have access to global markets with relative ease and security. This should make it a lot more convenient for them to tap into new and state-of-the-art investment instruments and boost their portfolio’s potential for robust and sustainable growth.
For more information about international investing, read blogs on LOM Financial.
China, India, and Brazil have rapidly risen as economic giants over the last few decades, with economies thumping those of the United Kingdom, Germany, Japan, and even the United States (in terms of purchasing power parity GDP). In the next several years, more countries from the developing world will emerge as financial juggernauts, possibly creating new opportunities for international investors to find new green pastures where they could park and grow their money.
According to Business Insider, the following countries are set to make significant impacts on financial markets and the global economy as a whole (in no particular order) within the next few decades:
Indonesia
The world’s largest archipelago, Indonesia has for the most part of its history anchored its economy on commodities, such as mineral fuels and lumber. However, such sectors will eventually stagnate and the economy will start capitalizing on services and manufacturing. The economy will also benefit from better infrastructure and a streamlined bureaucracy.
Egypt
The rapidly urbanizing Egypt will see significant improvements in its real estate sector. Other industries such as tourism, energy, and Information Technology will also skyrocket. The IT sector, most especially, has been stimulated by next-gen Egyptian entrepreneurs strongly supported by the government.
Bangladesh
With a huge labor force, extensive arable lands, and one of the largest banking sectors in South Asia, Bangladesh has been listed as one of the ‘Next Eleven’ emerging markets. It will also develop into a global manufacturing hub in the coming years.
The textile and automotive sectors in Pakistan have seen dramatic growth over the last few years and they aren’t showing any signs of slowing down. Improving domestic energy supply and growing manufacturing investment would also spur further economic progress.
Philippines
Currently the biggest business process outsourcing (BPO) center in the world, the Philippines will continue to develop into a leading human resources powerhouse. It also posted one of the Asia-Pacific region’s highest GDP growth rates in 2015 and forecasts continue to be positive. Robust private consumption, a booming construction sector, and ongoing business environment reforms are also making the country more conducive for both foreign and local investments.
Tap into the financial potential of these emerging markets through the services of offshore financial management firms. Visit this WEBSITE for assistance.
