30/09/2024

BIZ & FINANCE MONDAY | SEP 30, 2024

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Most investors mull portfolio changes ahead of US election NEW YORK: Most wealthy investors are considering changes in their portfolios ahead of the Nov 5 US presidential election, according to a survey by UBS released last week. As investors focus on the economic policies of the candidates, 77% of them are considering new allocations, it found. The economy is seen as the most important issue in the election by 84% of investors, and they are split on which candidate would better handle it. Fifty one per cent of wealth clients surveyed said Republican candidate Donald Trump would handle the economy better, while 49% said Democratic candidate Kamala Harris would do better. The respondents who said Trump would handle the economy better cited the ex-president’s approach to taxes, lower business regulations and immigration policy. The group favouring Harris on the economy cited the vice president’s policies for the middle class, healthcare, green energy and preservation of the independence of the US Federal Reserve. Healthcare, materials, sustainable investing and technology companies could benefit from potential Harris policies, according to most investors surveyed. The industries that would benefit more from a new Trump presidency would be defence, energy and industrials, they said. Jason Katz, senior portfolio manager at UBS Global Wealth Management, said an increase in investors seeking guidance for their portfolios is common in all election cycles, but the bank is recommending a cautious approach. “We advise against any drastic changes, either in investment or tax management.” The economic outcomes will depend not only on which candidate wins the presidency, but also on the composition of Congress, according to Katz. Democrats currently control the Senate and Republicans have a majority in the House of Representatives. A new Trump presidency could add to inflation by adopting import tariffs, while less regulation would create incentives to M&A transactions, with the biggest beneficiaries being financials and fossil fuel industries, Katz said. If Harris wins with no Democratic control of Congress, potential tax hikes could be more difficult to approve, Katz added. Katz said he expects regulation to remain stringent in a Harris administration, a circumstance that would affect mainly financials and fossil fuel companies. On the other hand, Katz said, companies focused on renewable energy and some industrial and material companies could benefit from her potential policies. – Reuters

Debt-laden Americans buy now, pay later

NEW YORK: US shoppers are expected to spend a record US$18.5 billion (RM76 billion) using third-party buy now, pay later (BNPL) services for holiday purchases in the last quarter of the year, according to projections by data firm Adobe Analytics released last week. With many Americans recently carrying more debt, spending on buy now, pay later services is set to increase by 11.4% over the holiday season a year ago, Adobe said. BNPL services let shoppers expand their purchasing power by paying for merchandise in monthly installments spread out over as many as 36 months; however, the most common payments are four-installment plans. The expected jump in spending using BNPL exceeds the projected 8.4% increase in overall spending in the upcoming holiday shopping period, which could reach about US$240.8 billion, according to Adobe Analytics. Its forecast applies to the period between Nov 1 and Dec 31. That means that firms such as Klarna, Afterpay and Affirm are set to take market share away from debit cards and other forms of payment on purchases of electronics and beauty products for the holidays, a time when many shoppers increase their debt purchasing gifts. Yet some shoppers use credit cards to cover the installment payments due with BNPL services, which consumer watchdogs say could worsen their debt. Shoppers using credit cards to make BNPL purchases risk putting themselves in a cycle of debt that is difficult to escape, said Delicia Hand, senior director of the digital marketplace at Consumer Reports. “If the credit card balance isn’t paid in full each month, they will incur interest charges for the buy now, pay later purchases on top of any potential BNPL fees,” Hand said. US lenders’ net charge-off rates for credit cards, or the amount banks did not expect to collect on the loans, rose to 4.82% in the second quarter, according to data from the Federal Deposit Insurance Corporation. That was the highest since 2011. The New York Fed’s monthly Survey of Consumer Expectations, which among other things asks consumers to estimate the probability of becoming delinquent on a loan in the next three months, was 13.6% in August, the highest since a short-lived spike at the onset of the Covid-19 pandemic. The figure was 19.5% for those with annual incomes under US$50,000. Nearly 10% of BNPL purchases are made using credit cards and automated clearing o BNPL services let shoppers pay for merchandise in monthly installments

An employee at Best Buy electronics store helping to move out a television after a shopper made a purchase in New York. – REUTERSPIC

house transactions, according to the Financial Technology Association, which has Zip and Klarna as members. The association said that its members report less than 2% delinquency rates for BNPL purchases. Affirm expects shoppers to hunt for electronics including cellphones, laptops and headphones this holiday season as they look to replace personal gadgets purchased during the height of the pandemic. The company said beauty will also be a top category for BNPL shoppers purchasing gifts. Affirm, which can be used at Adidas.com and Bergdorf Goodman.com, allows users to make Pay in 4 purchases and down payments with credit cards, but it does not accept credit payments on most of its loans, according to its website. Affirm also powers Shopify’s BNPL service Shop Pay, which allows credit card transactions on its pay-in-4 product. Credit card payments make up a “single digit percentage” of the overall payments Affirm collects, according to a company spokesman. “In general, we don’t think that a credit repayment for credit is a good thing,” Affirm chief operating officer and chief financial officer Michael Linford said. Afterpay, which allows pay-in-4

installments at Nike.com and Target.com, accepts payments with credit and debit cards from Mastercard and Visa, according to the company’s website. It does not allow shoppers to use cards issued by other BNPL providers to make purchases. Klarna accepts debit and credit cards from Visa, Discover, Maestro and Mastercard; however, shoppers cannot make payment for purchases made with the Klarna card using credit cards. Mastercard has guidelines for BNPL providers and issuers, according to a company spokesperson. The credit card company continues to review its standards as BNPL via credit cards usages evolve, the spokesperson said. In May, the US CFPB issued an interpretive rule applying new requirements for BNPL lenders. It requires BNPL companies to investigate consumer disputes, refund products that have been returned and provide periodic billing statements. The companies are not required to assess a consumer’s ability to repay a loan. American Express lets its users pay BNPL installments with a limited number of BNPL providers, a company spokesperson said. It also lets its credit card members use its BNPL service Plan It, which is connected to American Express’ physical credit cards.

Indian steelmakers seek higher tariffs as Chinese imports surge NEW DELHI: India’s steelmakers have called on the government to double tariffs on steel imports to curb a surge in cheaper steel shipments from China, according to a letter from an industry association seen by Reuters. The world’s second-biggest crude steel producer became a net importer of the alloy in the fiscal year through March 2024 and the trend has continued into the current year. Finished steel imports from China hit a seven-year high over April-August while overall finished steel imports hit a six-year high of 3.7 million metric tonnes. In a letter dated Sept 2, the Indian Steel Association (ISA) called on Minister of Finance Nirmala Sitharaman to double the customs duty on steel imports to 15%. ISA represents major steel producers such as JSW Steel, Tata Steel, ArcelorMittal Nippon Steel India and state-run Steel Authority of India. “Industry is concerned about the surge in imports of steel into India at predatory prices and the threat posed by China’s downturn,” ISA said in the letter to Sitharaman. The trend of cheaper steel imports is likely to continue, ISA said.

“There is an imminent threat of further surge in imports in the coming months.” As surplus Chinese steel makes its way into global markets, Japanese and European steel makers have sought import curbs. In the US, a 25% tariff on Chinese steel takes effect on Friday. Steel Minister H.D. Kumaraswamy this month said Indian steel makers

were “suffering” because of cheaper imports. In its letter, ISA also urged Sitharaman to impose an extra 25% import tax on steel. ISA has also sought the removal of the “lesser duty rule” under which the import duty should be fixed at a level only to avoid injury to Indian producers rather than fixing the import tax at a higher rate. – Reuters