Thursday 28 Mar 2024
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THE ARRIVAL of technology start-ups offering financial advisory services is a sign that banks need to evolve digitally as well. When it comes to technology, few are more savvy than Hong Leong Bank. 

Its digital banking platform, Hong Leong Connect, has won awards for its PEx (Payment Express) service, which allows users to transfer money simply by keying in the recipient’s phone number. In fact, it is the first app by a Malaysian bank to appear on the Apple Watch, which hasn’t been released on our shores yet.

Sik puts this down to understanding consumer behaviour. “If the customers are already in the internet space and are looking for convenience — whether it is for transactions or information gathering — it is intuitive to say that you need to be there if you are a bank and want to engage with them.”

He believes that being a late starter is not a bad thing when it comes to digital banking. “If you look at the platforms 10 years ago, compared with what we have today, they are a lot more user-friendly and eye-catching. Being a first mover is not really an advantage because it was a lot more expensive 10 years ago.” 

Views on investing

Sik bought his first stock before he even graduated. Equities remain his favourite asset class.

“I have been a long-on-equities person for many years. If you look at asset classes that outperform, it has always been equities,” he says. 

Sik says investing in equities essentially means that a person is betting on companies, and that companies are the “lifeblood” of an economy. Unsurprisingly, he declares himself a fan of Warren Buffett and the “simple common sense philosophy” he brings to the table. 

“Understanding the intrinsic value of a company and where your margin of safety is — these are well-known concepts of his investing philosophy that are really common sense,” Sik remarks. 

“You want to invest in a company whose intrinsic value you really, truly understand. Obviously, he is better than most at finding that out. For example, if you find that a company is worth RM1 billion and its market value is RM200 billion, what’s your margin of safety? You can lose RM199 billion. There’s not a lot of margin of safety,” he says.

“But if the company is worth RM1 billion today and its market capitalisation is RM1.5 billion, and it has gone up to RM10 billion before, then you know it is very close to its intrinsic value. You also know your margin of safety is quite big because you are almost at the real value of the company. Anytime it goes below the intrinsic value, if you really believe the company has long-term potential, you should buy it.”

Sik does not believe in following investing trends, such as favouring a particular asset class over another at different times. “I always feel that [investing according to] the direction of where some asset classes might go, or which sector ... that’s not really the basis for investing. The basis for investing is very individual for me — it is at the point of where you are and what you are looking for.

“If you are a risk taker and you have a longer timeline to your investment horizon, regardless of which asset class it is, you should go long on equities. 

“If I have a lot more money and I am waiting to invest, my evaluation is not merely where asset classes will go, but the cost of money. What am I using the money for? Is it money to grow more wealth, or money I shouldn’t be looking at for wealth appreciation, but for wealth protection?

“If I wanted to beat inflation, then my strategy would be very different.  I would be looking for asset classes that beat inflation. It is not a one-size-fits-all.”

What are the lessons learnt? “I think one of the best things I have learnt is to invest when markets are really in a crisis. We have had many such instances, like the Asian financial crisis and global financial crisis. If you look at these points in time, the biggest lesson is that if you really get into one, start investing,” he says.

Sik recalls that when banks were hit by the global financial crisis, lending gradually ceased because they could not save themselves. The companies that didn’t require credit for their businesses were ideal investing opportunities, he says. 

“Look at Apple at the time of the crisis. It was down to US$75 a share. A company like that doesn’t need to borrow money, and it has a fantastic customer base ... and product proposition. If you were to bet, you would bet on a company like that. 

Today, Apple is trading at about US$130 (RM486.50) a share. Apple at US$75 was adjusted via a share split to US$15, so the value today is eight times.”

 


This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on June 22 - 28, 2015.

 

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