Equities around the world have been under pressure recently as global growth has been called into question.
The prospect of rate hikes in the US and the UK are further concerning investors in stocks as the days of low interest costs are coming to an end.
For those that have enjoyed the multi year bull run it may be worth considering their next move and getting some protection.
As the Chinese military philosopher and strategist Sun Tzu once said; ‘In times of peace, prepare for war’
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According to figures from Kantar Media, three million adults across the nation do not have a bank account. These adults are excluded from taking out loans and mortgages and do not have the opportunity to save. The World Bank Group President Jim Yong Kim has said that access to financial services is “a bridge out of poverty”; so why isn’t more being done about it?
For the CEO of high street lender Oakam, Frederic Nze, there is huge gap in the market for an ethical microfinance company to meet the needs of these people. At the moment, the problem is not being met responsibly; pay day loan companies are now well-known for taking advantage of those in need and luring them into debt. Many of the unbanked population are migrants, moving here to work but without a credit rating, they have no access to traditional financial institutions. Born in the Congo and working in the UK, France and the US, Nze has a unique insight into the migrant community, and the problems they can face from a financial perspective.
In 2001, Nze began working at Barclays, where the scale of the problem was first noticed. Barclays asked Nze to develop a 12 month trial programme to get those without bank accounts or a credit rating into mainstream banking. Whilst there was a considerable demand from customers, Barclays felt that they didn’t have the resources to deal with those who were not financially literate and unfortunately, the programme failed; ultimately, it didn’t fit their corporate image. Seeing the potential and obvious need to help those without the resources to open a bank account, Nze left Barclays to set up the venture on his own; and so, Oakam was born.
At first sight, Oakam looks remarkably like the many other payday loan companies you see advertised here, there and everywhere. However, Nze maintains that, ultimately, Oakam has a very different concept.
Firstly, the customer base is different. Rather than catering to those who have previously had a credit rating and have lost it due to poor management or the financial crisis, Oakam offers loans to those who have never had a rating, or any debt. His aim is to help people get into mainstream banking, often migrants who have recently moved here to work and want to establish themselves and their business, but are not given the opportunity to take out loans with mainstream banks.
Secondly, and most importantly, Nze’s business is built on relationships. Most pay day loans have no relationship between lender and borrower – all it takes is a simple form on the internet and the money appears in your account, as if by magic. However with Oakam, building relationships is key. The company has a prominent presence on high streets in London and the Midlands, meaning that in order to take out a loan customers have to meet with an advisor who will assess ability to repay. Oakam aim to retain their customers, offering a cheaper rate every time they borrow.
Picture: Telegraph.co.uk
The most obvious difference between Oakam and other pay day ‘loan sharks’ is the cost of their service. Lending to the unbanked is not without risk; which is reflected in Oakam’s interest rates which, at 1424% APR, are actually higher than a lot of other pay day loan companies. However, Oakam charge no fees for missing a payment – most companies will charge £20 – and no cumulative interest. The amount you borrow, plus interest, is set out at the beginning with no hidden charges or costs.
Oakam have recently recruited several people from high profile banks and institutions to drive the company into its next phase: moving online. Whilst I questioned the motive when their stores are what creates such a personal relationship with customers, Nze was adamant that it is the right move for the company.
“Firstly, it is cheaper cost of service. With fewer over heads, we can make the whole process cheaper and pass these savings onto our customers.
“Another reason is improving accessibility. The type of customers we cater to can be put off by going into a store, for fear of being declined. Not only does an online system make it more accessible for those people, but more people can benefit in a shorter time; it would take four years of opening stores to be national – however, could do it in 6 months with online.”
Like many other Fintech firms Nze saw London as the best choice for starting his company, and feels strongly about London’s reputation as a centre for Fintech innovation.
“One of the reasons why I set the company up here is that within 15 minutes you can raise money or recruit the best people. There is a real eco-system that makes business ideas possible here.”
Whilst Nze is reluctant to comment on the controversy that other pay day loans create, it is obvious he disagrees with their principle. Whilst there was a gap in the market for a those companies a few years back, he believes that people have wised up to their offers and they may not be around for much longer; and for Oakam and the unbanked population, this can only be a good thing. Three billion adults without access to savings accounts, loans and other financial help is three billion too many, and more needs to be done; and companies like Oakam, who promote responsible lending and sustainable microfinancing, could well be a good place to start.
Shares in Danish brewer Carlsberg (CPH:CARL-B) plunged more than 7 percent this morning after reporting disappointing half-yearly results.
Operating profit before special items fell 18.9 percent to 2.92 billion Danish crowns ($432 million) in April to June, below a forecast of 3.24 billion crowns in a Reuters poll.
Group beer volumes declined by 5 percent due to continued decline in Russia and Ukraine and bad weather in Western Europe.
However, the group saw strong performance of their international premium brands, including Tuborg, which was up 16 percent, and Somersby, up 26 percent.
CEO Cees ‘t Hart said in a statement: “The first half of 2015 has been challenging for the Group. For the full year, we therefore do not expect that the strong Asian performance will be enough to offset the weaker than expected results in Western Europe and the challenging market conditions in Eastern Europe.”
The group revised their earnings expectations for the year, with profits taking a 300 million crown hit.
Carlsberg are currently trading down 8.05 percent (0958GMT)
Bitcoin has long moved on from being seen as a shady currency used only for illegal purchases. There has been plenty of hype surrounding Bitcoin and other cryptocurrencies in recent months, especially with regard to start-up technology businesses and overseas transfers. However, it is becoming increasingly recognised that Bitcoin may have other, more ethical benefits.
According to the World Bank, more than two billion adults lack access to bank accounts and credit cards to save and borrow funds. McKinsey suggest 2.5 billion people have no credit score, meaning that they can’t buy a home or start a company; which is where Bitcoin comes in.
One of the biggest benefits of Bitcoin for the unbanked population is its cost – or lack of.
Bitcoin is the first Internetwide payment system where transactions either happen with no fees or very low fees. According to a research by ODI, Africa’s diaspora pays 12% to send $200 back home. And according to the same research, Western Union in Rwanda charges closer to 18–19%. With Bitcoin, currency transfer costs are far lower than banks or even companies such as Transferwise.
Similarly, the lower cost of international transfer could be a real boost to SMEs in emerging nations, where small businesses struggle to compete internationally due to costs associated with changing currencies and processing fees.
The second big benefit of Bitcoin is its independence. The system works without a central repository or single administrator, meaning it is a completely decentralised virtual currency. It is not subject to market control by one organisation.
This feature makes Bitcoin inherently useful, in that many countries with a large unbanked population are countries where corruption is high. With Bitcoin, there is no need to do not trust banks; wealth held in bitcoins can be securely stored free of transaction fees for an indefinite period, and cannot easily be expropriated by the state or limited in any meaningful way in their movement between jurisdictions by capital controls.
Similarly, for countries in economic difficulty, they cannot be devalued over time by inflationary monetary policies. With the recent trouble with Greece, Bitcoin became seen as a viable option for holding money should Greece exit the euro.
Venezuelan-born Meyer ‘Micky’ Malkais a director at the Bitcoin Foundation. He believes that what bitcoin can do is “embrace transparency in a country where there isn’t any”.
“It’s an asset for when you do not trust your government, which is a real aspect of what’s going on down there right now.”
Both its low cost and independence make Bitcoin an attractive way of storing and sending money cheaply for those with no bank account. Yes, cryptocurrencies are a relatively new phenomenon, and that comes with its own difficulties; as Malka says, “you cannot expect bitcoin at five years old to take all that responsibility and act like a grown-up. It is still a toddler.”
However, the figures cannot be ignored. With over two billion people not having access to simple financial services that allow them to save, invest or grow their businesses, there will always be a certain proportion of the population who have no hope of working their way up. The World Bank Group President Jim Yong Kim has said that access to financial services is “a bridge out of poverty”; if Bitcoin can help those developing countries get on the ladder, it is well worth investigating.
After a difficult couple of months Twitter (NYSE:TWTR) has announced their intention to focus heavily on expansion in Asia and the Middle East, hoping to follow the success of Facebook in the region.
The company have appointed former head of public-private partnerships for Google Rishi Jaitly as new vice president of media for Asia Pacific and Middle East. In a statement, Twitter said that they aim to utilize partnerships with key Asian media companies to publicise the platform.
Whilst Facebook is currently blocked in China, Twitter hopes there will be no similar problems for them in the region; the state-owned Chinese publisher Xinhua is a big user of Twitter and publishes daily reviews of China’s news on the platform.
Over the last three months shares in Twitter have dropped dramatically, after problems with marketing and the departure of CEO Dick Costolo. Shares were trading at 52 pence per share in mid April, and at around 30 pence per share yesterday.
Chinese stocks dropped again on Tuesday as the yuan weakened against the dollar, despite a stronger midpoint set by the People’s Bank of China.
The fall gave way to fears that the country may be aiming for further devaluation of the currency, despite insistence from the central bank that it will not happen.
The Shanghai Composite Index closed down 6.1 percent at 3,749.12 points in its biggest daily decline since July 27, after a three day winning streak, and the CSI300 index fell 6.2 percent at 3,825.41.
The central bank made its biggest injection of funds into the markets in more than six months earlier this morning, adding to worries that liquidity was tightening as investors moved more capital out of the country.
The People’s Bank of China made a surprise devaluation of the currency last week by nearly 2 percent, shocking the markets and prompting two days of further currency decline.
Energy services company Wood Group (LON:WG) are trading down 3.5 percent this morning after announcing their half-yearly results.
The company have 5000 jobs this year in the UK, US and the Middle East after being hit by the challenging oil market. The price of Brent crude has dropped by more than 50% in the past 12 months to $48.60 a barrel.
Pre-tax profit for the first six months of this year was down $233.3 million from a year earlier, at $160.2 milion. Their total revenue was down almost 20% at $3.1 billion.
Wood Group’s CEO Bob Keiller said in a statement:
“Conditions in oil and gas markets remain very challenging.
“With little prospect of short term improvement in market conditions, we will focus on remaining competitive and protecting our capability, working with clients to reduce their overall costs, increase efficiency and safely improve performance.”
However, despite the fall in half-year profits, the company’s outlook for the full year remains unchanged. Wood Group are currently trading down 3.62 percent at 558.5 pence per share (1024GMT)
Nationwide has estimated that a new banking tax introduced in the July Budget may cost it £300 million, affecting their ability to lend.
Nationwide is Britain’s second biggest provider of home loans, providing more than a quarter of total net lending to the British housing market of the past year. The building society have announced that the changes could could the equivalent of £10 billion worth of consumer lending.
Chief Executive Graham Beale argues that the budget should have recognised the difference between building societies and banks. He said:
“This represents a missed opportunity to support diversity by acknowledging that building societies are different to banks and to recognise the contribution Nationwide and other mutuals make by lending to the UK economy, and the housing market in particular.”
Nationwide reported a 52 percent increase in first-quarter underlying profit to £400 million.
Consumer Price inflation has risen to 0.1 percent in July, up from 0 percent in June.
The Consumer Price Index has remained flat for the last coupe of months, having turned negative in April for the first time since 1960.
The Retail Prices Index measure of inflation was unchanged at 1 percent.
“The slight (annual) increase is mainly due to clothing, with smaller price reductions in this year’s summer sales compared with a year ago,” said ONS statistician Richard Campbell told Reuters.
An underlying measure of inflation, which strips out increases in energy, food, alcohol and tobacco, rose to 1.2 percent in July, up from from 0.8 percent in June.
The pound is surging on the news, up 0.55 percent on the US dollar and 0.56 percent on the euro.
Morrisons (LON:MRW) is in talks to sell its convenience store branch of the company to the same investment firm that rescued Monarch Airlines, Greybull Capital.
The deal was first reported in The Telegraph yesterday. Chairman Andy Higginson admitted that more than 30% of its convenience stores had not worked, and confirmed plans earlier this year to close more than 20 M local stores.
Greybull Capital took over Monarch last year, investing £125 million into the company and setting it track to make a profit. The takeover of Morrisons local stores is rumoured to be worth tens of millions.
In February, David Potts took over as chief executive of the struggling chain, and has since turned the company around, making it one of the best performing supermarkets over the 2014 Christmas season. The sell-off of M local stores is the next in a series of structural changes he has made to the company.
Morrisons is currently trading down 0.88 percent, at 176.24 pence per share.
