Business alarmed by Hong Kong’s draconian security law

Hong Kong’s future as a major financial hub is again in question after parliament unanimously passed a new security law that increases the government’s power to quash dissent and threatens to stifle open economic discussion.

The new legislation threatens sentences of up to life imprisonment for offences including treason and insurrection, as well as stringent penalties for other offences such as sabotage, sedition, external interference and theft of state secrets. The new crimes come into force from this Saturday.

Under the law, authorities will have wider tools to minimise dissent, while police will be given expanded powers. The legislation’s broadly defined state secrets offenses bring Hong Kong in line with China’s vague legislation around espionage, which has unsettled foreign investors over the past year.

Hong Kong lawmakers unanimously passed the new bill only two weeks after it was first presented, fast-tracking a major piece of legislation that critics say further threatens the city's freedoms.

The Legislative Council claims that the package, known as Article 23, aims to protect national security, but critics warn that the new legislation will further erode civil liberties. The European Union was quick to voice alarm at the bill, which it said had the potential to “significantly” affect the work of the EU’s office and the territory’s status as a business hub.

UK Foreign Secretary David Cameron commented: “The broad definitions of national security and external interference will make it harder for those who live, work and do business in Hong Kong. It fails to provide certainty for international organisations, including diplomatic missions, who are operating there.

“It will entrench the culture of self-censorship which now dominates Hong Kong’s social and political landscape, and enable the continuing erosion of freedoms of speech, of assembly, and of the media.”

Hong Kong’s leader, John Lee, has repeatedly maintained that a pressing need to focus on economic development was one of the reasons behind expediting the legislation. Since coming to power in 2022, Lee has prioritised national security, even at the cost of Hong Kong’s reputation as one of Asia’s main financial hubs despite increasing competition from Singapore.

While his administration has taken steps to boost overseas investment and stimulate spending, the city’s financial markets are in the doldrums and the economy, hard-hit by lockdowns during the pandemic, is struggling.

The crackdown comes only three months after China’s financial policymakers visited Hong Kong, meeting bankers to seek ways to bolster the city’s status as a hub for investments, deals and talent.

As The Japan Times notes: “While companies are increasingly choosing Singapore as their Asian base, Hong Kong’s role as a financial centre dwarfs that of its rival. The city continues to be home to the Asian headquarters of Wall Street banks and its US$4.8 trillion stock market is the world’s fourth largest.”

Hong Kong is also a key fundraising centre for Chinese companies seeking access to international capital markets and the primary conduit for foreign firms to invest in China.

Yet the city’s challenges are mounting. Borrowing costs have surged due to a currency peg with the US dollar. Expats and younger locals have departed as financial sector jobs dry up and concern mounts over Beijing’s greater oversight.

More broadly, foreign capital is increasingly bypassing China at a time when the country’s slowdown is weighing on domestic consumption. Beijing’s crackdowns have ensnared industries from tech to property, with multiple developers defaulting on their debt.

 

Reddit valued at US$6.4 billion ahead of IPO

Shares in Reddit make their market debut today after a sale valuing the social media platform at US$6.4 billion.

The company's initial public offering (IPO) was priced at the top of its targeted range of $31 to $34 per share on Wednesday night, raising $748 million.

Reddit and its existing shareholders sold 22 million shares at $34 each.

Trading will begin on the New York Stock Exchange (NYSE) when it opens for business on Thursday day. The shares will trade under the ticker ‘RDDT’.

Market analysts regard the IPO as a major test of the market given a dearth of flotations over the past three years, suggesting it had been sensibly priced. Reddit was previously valued at US$10 billion following a private fundraising round in 2021.

“Given the social media platform is a household name and there has been a distinct lack of opportunity for investors to get their hands on new listings, there is likely to be a surge of interest in the stock when it begins trading on the NYSE,” said Susannah Streeter, head of money and markets at financial services group Hargreaves Lansdown. “The IPO is believed to have been oversubscribed multiple times, even though the company is still loss making and a steady path to profitability is far from clear.

“Reddit has no problem getting eyes on screen, but it has had a challenge so far in working out how to monetise its large and growing fanbase who are obsessed with using its message boards. It is increasing ad presence which should provide relatively steady income streams though won’t shoot the lights out. The real potential is likely to come from making the most of its vast store of data in the form of a deep well of conversations on the site. This could be harvested by AI models, and in its prospectus the company revealed it’s already been licensing some data.

“This direction of travel looks even more likely given that Open AI’s Sam Altman is a key investor, controlling 9.2% of the voting power. The governance structure has been questioned given that it cements control of the company among current investors and company insiders with very limited voting rights for new shareholders. The IPO will give Reddit a strong balance sheet to pursue a path towards profitability and growth, but with so much power concentrated in a few hands, risks of missteps are higher.”

 

Malaysia’s central bank expects 4-5% growth in 2024

Malaysia's economy is expected to grow faster at 4% to 5% this year, driven by improved investment and external demand, according to the country’s central bank.

The Southeast Asia country reported 3.7% gross domestic product (GDP) growth last year, down from 8.7% in 2022 due to weak external demand resulting from China's economic slump and U.S. monetary policy tightening.

According to Bank Negara Malaysia’s (BNM) governor Datuk Abdul Rasheed Ghaffour, the Malaysian economy will be supported by resilient domestic demand and improved export volumes.

“The economy is set to improve. We expect the continued expansion in domestic demand and the recovery in exports to support economic growth this year,” he told reporters when releasing BNM’s 2023 annual report.

Abdul Rasheed said the outlook remains subject to downside risks emanating from both domestic and global factors and BNM’s monetary policy would continue to be forward-looking with a focus on the trajectory of growth and inflation.

He added that the services and manufacturing industries are projected to be the key economic drivers this year. “The services sector, particularly consumer-related sub-sectors, will benefit from tourism activities and favourable labour market conditions. The business-related sub-sectors will be supported by better trade and construction activities.

“The manufacturing sector is expected to grow at a stronger base, this will be driven by expansion in the electrical and electronics (E&E) cluster amid the global tech cycle rebound and improvement in regional economies will also benefit the non-E&E exports.

“In addition, resource-based manufacturing will be supported by better upstream supply conditions.”

However, Abdul Rasheed said, the agriculture sector is expected to register a small contraction, due to the impact from the El Nino weather phenomenon and the previous year’s under-fertilisation of crops.

Meanwhile, headline inflation is expected to average between 2% and 3.5% in 2024 amid contained cost pressures from easing global supply conditions.

“Inflation outlook remains highly subject to upside risks due to potential price adjustments on food and energy items, as well as external pressures from exchange rate and global commodity price developments.”

 

Fed reassures that rate cuts are in the pipeline

The Federal Reserve announced that it will leave US interest rates at a 25-year high as it continues to assess their impact on cooling inflation and the wider economy.

After a two-day meeting, the Fed announced rates would be unchanged at 5.25% to 5.5%, where they have been since July but signalled it still expects to cut rates three times this year. However, it still wants more evidence that inflation is falling before making a move.

A statement from policymakers said: “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.” US inflation edged up to 3.2% in February from 3.1% the previous month.

The wording reassured the markets, with the Dow Jones Industrial Average (DJIA) index adding 400 points.

Economic forecasts show that the Fed expects a measure of core inflation to end the year at 2.6%, higher than the 2.4% forecast last December. The US economy is expected to grow by 2.1% this year, revised upwards from the 1.4% forecast made at the end of 2023.

The Fed’s latest decision came ahead of today’s voting on rates from the Bank of England’s monetary policy committee (MPC) which, as expected, saw UK rates kept on hold at 5.25% despite UK inflation falling to 3.4% in February. Eight of the MPC’s nine members voted for no change but said that inflation was finally “moving in the right direction”. It was the first time that no members of the committee voted to increase rates since September 2021.

Analysts expect that the BoE, the Fed and the European Central Bank (ECB) will all start to bring down borrowing costs in June.

 

UK retailers report positive revenue impact from embedded finance

UK retailers have reported incremental revenue growth as a result of embedded finance, according to a report published by banking-as-a-service (BaaS) platform NatWest Boxed and Boston Consulting Group (BCG).

Their research indicates companies in the sector have reported a 5% to 12% boost in conversion rates, a 15% to 30% increase in average order values and a 4% to 7% incremental revenue growth overall from the use of embedded finance.

Ecommerce has been a key driver of embedded finance growth, providing a widely adopted channel to reach customers. Research shows that segments with higher BaaS revenue tend to have higher ecommerce penetration of over 50%.

Technology platform capabilities and end-to-end customer support were identified as the top reasons for selecting a BaaS provider, more important than price.

Andrew Ellis, CEO, NatWest Boxed, said: “Embedded finance is reshaping the retail industry. With developments in cloud-native technology and product innovation converging, retailers are increasingly offering financial services and embedding them into customer journeys. But with an increasingly complex landscape of products, technology and suppliers to choose from, retail leaders need to ensure they focus on the right services with a trusted and secure BaaS partner to maximise the opportunity.”

The report also explores the revenue potential for retailers from the use of embedded finance, with a focus on fashion, home improvement and marketplaces sub segments and the key enablers driving the growth of embedded finance, including the correlation between ecommerce penetration and BaaS revenues across retail segments. 

The report also looks at how embedded finance has enabled an evolving credit value chain, with credit cards at risk of cannibalisation vs point of sale (POS) financing which shows growth potential and how retailers can get started with their embedded finance journey, focusing on identifying customer needs, choosing the right products and services and identifying a BaaS provider that has a clear understanding of the business’s customers, products, technologies and operational context and requirements.

 

RBI alerts banks to cyber security threats

The Reserve Bank of India (RBI) has cautioned a number of the country’s banks, urging them to fortify their defences against potential cyber-attacks, as per a Moneycontrol report citing industry sources.

The warnings, issued to select banks, follow the central bank’s recent Cyber Security and Information Technology Examination (CSITE), wherein action points were provided to address identified vulnerabilities, the report added.

Distinct from routine risk assessments, the CSITE, scrutinises banks' disaster management readiness, internet and mobile banking platforms, and fraud detection mechanisms. It serves as an independent review, initiated several years ago, to bolster cyber security surveillance.

“The RBI conducts a separate inspection to identify deficiencies in the cyber security capabilities of banks. This time, they met us and have given a list of action points where deficiencies need to be addressed,” said one source.

RBI Deputy Governor T Rabi Sankar recently stressed the need for the banking sector to be prepared for evolving cyber threats and said banks must revamp their encrypted systems to counter artificial intelligence (AI) abuses.

 

MoneyGram and Trustly launch cardless cross-border payments in Europe

Payments specialist MoneyGram International and payments software provider Trustly have partnered to enable MoneyGram users in Europe to make cardless international money transfers.

The service enabled by the collaboration allows users to pay directly from their bank accounts when sending international money transfers through MoneyGram Online (MGO), the companies said in a press release.

This service is now available select European countries, including the United Kingdom and Germany, according to the release.

“With this partnership, we look forward to giving consumers the ability to transfer money with ease, leveraging our collective cross-border capabilities and market-leading reliability,” said  Jussi Lindberg, chief revenue officer at Trustly Europe.

The cardless payment capability is powered by Trustly’s proprietary data engine, Azura, which provides financial institutions with a pay-with-bank infrastructure that includes near-instant payments and know your customer (KYC) capabilities, the release said.

These capabilities have been added to MoneyGram’s financial technology that connects the world’s communities, per the release.

For MGO users, this new offering eliminates the need to manually enter their card information on the app, the release said.

 

CRIF delivers open banking for BMW Financial Services

A UK partnership between credit information provider CRIF and car finance and loan company BMW Financial Services will help drive instant decisions on lending applications and make the purchasing experience smoother.

CRIF will supply BMW Financial Services and its associated brands with advanced open banking services across hundreds of UK vehicle retailers, to power seamless credit checks for car finance.

Open banking-powered credit checks will provide a more comprehensive picture of an applicant’s true creditworthiness. Individuals who might previously have been turned down will be accepted for a loan without any extra risk for the lender.

In turn, customers will be able to access car finance more easily, benefitting from faster decisions, with financial products tailored to them and appropriate for their current financial circumstances.

CRIF believes it will also help retailers approve more borrowers, thanks to a holistic, enhanced view of an applicant’s creditworthiness.

In the US, CRIF’s Indirect Lending Service is used by car dealers and lenders to make loan approvals faster, more accurate and virtually paperless. The company reports that its technology has resulted in a 7.5% increase in consumer lending across all geographies and customers, with an 11.9% decrease in risk for consumers.

 

Hazeltree upgrades treasury and liquidity management platform

Software company Hazeltree has launched version 11, a series of enhancements to its treasury and liquidity management platform, which the firm says will provide hedge fund and private markets clients with enhanced user experience, increased ease of remote access and more robust security.

Key updates to the platform include secure remote access — the removal of the requirement for IP whitelisting allows clients to access Hazeltree solutions from a laptop or remote work location.

Version 11 also includes a mobile approver app, enabling users to approve or decline transactions, while fund admins can “switch companies” to support multiple clients.

“We are excited to unveil the latest product updates across our alternative asset ecosystem,” said Richard Winter, chief technology officer at Hazeltree. “Our security revamp serves as the foundation for new capabilities to allow workflows, especially for individuals on the move, solving a particular pain point for clients.”

Stephanie Miller, CEO of Hazeltree, said: “We have extensive plans for continued updates in the year ahead as we continue to scale the business and expand our product suite.”

 

SA fintech startup Float secures US$11 million funding from Standard Bank

South African fintech startup Float has secured a US$11 million funding facility from Standard Bank to facilitate the rollout of its card-linked instalments platform, supporting its accelerated growth plans over the next four years.

Launched in November 2021, Float encourages responsible credit card usage and, at the same time, helps merchants to grow their sales. The startup’s proprietary technology lets shoppers buy now and split their payments over up to 24 interest-free, fee-free monthly instalments using the available limit on their existing Visa or Mastercard credit card.

The startup already works with almost seven million pre-approved credit cards in South Africa, and there is no sign-up, registration or credit check process for consumers. It now expects to increase its well-established merchant base exponentially after securing the US$11 million debt facility from Standard Bank. 

“Partnering with Standard Bank is a major milestone for our business and is a huge vote of confidence in our model, its value to the payments ecosystem, and the future prospects of our team and business,” said Float founder and CEO Alex Forsyth Thompson.

“South African credit consumers reward merchants that offer them flexible and responsible payment options with their business and their loyalty. Float gives them exactly that and the result has been a drastic increase in conversion rates and, based on a recent case study across hundreds of our merchants, a 134% increase in our merchant’s average order values.”