US protectionist stance to continue incurring volatility
FAOM to create fintech network with global counterparts Key events which would be of particular concern include elevated tariffs against China and the likely withdrawal of the US from the proposed 12-member Trans-Pacific Partnership Agreement.
KUALA LUMPUR: RAM Ratings expects the global environment to become more volatile following the recent surprise outcome of the US presidential election.
In line with the higher likelihood of thenewadministrationpursuing more US-centric policies, the ratings agency expect some impact on global trade and investment flows.
This will consequently feature more in RAM’s assessment of rated sovereigns in the firm’s portfolio.
It added a more protectionist stance could have a significant effect on global trade flows, given that the US is estimated to account for nearly a quarter of global GDP in 2016.
“Key events which would be of particular concern include elevated tariffs against China and the likely withdrawal of the US from the proposed 12-member Trans-Pacific Partnership Agreement.
“Countries that are more dependent on the US for export demand may be more affected by the protectionist skew in its trade and industrial policies,” highlighted Esther Lai, RAM’s head of Sovereign Ratings.
Similarly, global direct KUALA LUMPUR: The FinTech Association of Malaysia (FAOM) hopes to create a network with other financial technology (fintech) associations worldwide to better complement this disruptive technology in financial services.
“We want to be the key enablers in the ecosystem and create a national platform that leads to fintech innovations and investments in the region.
“Technology has enabled us to rethink how we perceive traditional financial institutions and its services.
"Banksandinsurancecompanies are no longer the sole custodians of financing services.
“Rather, fintech has opened up prospects to serve the market by offering tools to improve operational efficiency,” FAOM president David Fong told a media conference yesterday.
He said the development of the industry, which is referred to as the fourth industrial revolution, was also aligned with the recently announced Budget 2017.
“The government is set to place a strong emphasis on developing the nation’s digital economy.
“This also coincides with the recent announcement by Bank Negara Malaysia on the Regulator Sandbox Framework (RSF) and the Securities Commission’s move to regulate Equity Crowd-Funding and Peer-to-Peer financing, both of which are key areas of fintech."
On Oct 18, 2016, the central bank issued the Financial Technology RSF that sets out the requirements for participating in the regulatory sandbox.
The sandbox allows regulatory flexibilities to be granted to financial institutions and fintech companies to experiment with fintech solutions in a live controlled environment.
“Across the Asean region, this emerging industry is growing increasingly prevalent and is set to grow over the years,” he said, adding the association currently has 54 registered members. investment flows may be adversely affected by increased business incentives within the US, marking a fifth of total global foreign direct investment (FDI) originated from the US in 2015.
Lower US corporate tax rates and enhanced business-expansion incentives are examples of policies that may slow global FDI flows.
This could have adverse implications for countries that are reliant on American FDI for growth, typically lower-income economies which offer significant cost advantages despite weaker business conditions.
“Another key concern would be investors’ prolonged and heightened risk aversion, which would exacerbate the volatility of global portfolio flows and commodity prices,” it said.
“This would be largely due to
Esther Lai, RAM’s head of Sovereign Ratings
the uncertainties surrounding the US’s existing trade and investment policies.
“The resultant exchange-rate volatility could come at the expense of economies with persistent trade deficits or countries that depend on foreign capital for short-term domestic liquidity.”
Given the adverse implications of a protectionist US, RAM anticipate global policymakers to adopt a more growth-supportive stance and take measures to alleviate short-term concerns.
“Also, we expect well-diversified economies with high levels of domestic savings, complemented by sufficient external reserves and fiscal space, to be well-positioned to absorb the impact of any drastic change in US trade policies.”