Category Archives: Niche Market

How to make money while you sleep

Thanks;Nancy Mann Jackson

Published: May 10, 2017 4:58 a.m. ET

Create passive income streams

Whether you’re trying to pay off debt, top off your emergency fund or invest more, a little extra monthly income can get you there faster.

But there are only so many hours in a day — and maybe adding another side hustle to your busy schedule just isn’t possible. Wouldn’t it be great if you could somehow earn more without working additional hours or hitting up your boss for another raise? That’s what happens when you create passive income streams.

Whether you’re trying to pay off debt, top off your emergency fund or invest more, a little extra monthly income can get you there faster.

But there are only so many hours in a day — and maybe adding another side hustle to your busy schedule just isn’t possible. Wouldn’t it be great if you could somehow earn more without working additional hours or hitting up your boss for another raise? That’s what happens when you create passive income streams.
“Passive income’s great because it increases your cash flow and allows you to save [more],” says financial adviser Craig J. Ferrantino, president of Craig James Financial Services, LLC in N.Y. “The initial effort in some cases is minimal, and you have the ability to collect money on those efforts over a period of time.”

Of course, investing in the stock market can provide earnings over time through market returns and the magic of compounding. But there are also ways to create steady streams of passive income that pay out at regular intervals.

These efforts don’t come without risk. But with careful planning and consideration, you can lower the risks — and initial costs — and increase the potential benefits.

Here are six paths to passive income that may be worth pursuing.

1. High-dividend stocks

When you purchase stock in a company that pays dividends to its shareholders, you’ll start earning a percentage of the company’s profits automatically. For example, if a company pays an annualized dividend of 50 cents per share and you own 500 shares, you’ll get an extra $250 in your pocket — for doing nothing more than being a shareholder. (Most companies pay dividends on a quarterly basis, so you’d earn about 13 cents per share each quarter.)

Certain industries, like public utilities, financial services and oil, tend to pay higher dividends than others, so do your homework with resources like Yahoo! YHOO, +1.31% Finance’s stocks screener or by talking to an adviser.

“If you’re going after dividend income, the sweet spot is not the company that’s currently paying the highest yield, but the companies that are likely to generate growth in dividends in the coming months and years,” says Rob Brown, a Certified Financial Analyst and chief investment officer at United Capital. “Pay attention to what companies and industries are thriving now; they are most likely to raise the dividends they’re paying now in the future.”

You may also choose to reinvest your dividends, which allows you to buy more shares even without spending more money, so you can benefit more when the price rises.

One caveat: Remember that there are risks involved with investing in individual stocks—even ones with high-dividend yield—as the price of the stock can go up or down. You can lower your risk by investing in an index or other low-cost funds, which contains shares of many companies. One option is to look for dividend-paying ETFs, or exchange-traded funds, which are funds that trade like stocks. (Investing apps like Acorns and Betterment use such ETFs and reinvest dividends automatically.)  

2. Bonds

Purchasing bonds can be another good way to earn consistent passive income, though the amount you’ll receive depends on the fluctuating bond market. “Bondholders [usually] receive a check every six months for the interest earned in loaning the entity money, and, in turn, get their principal back at maturity,” Ferrantino explains.

There’s a wide variety of bonds to choose from, including U.S. Treasury bonds, municipal bonds and corporate bonds. Each has its own maturity date, minimum investment, interest rate and payout. For instance, Treasury notes mature in two to 10 years and pay interest semiannually at a fixed rate (currently about 1% to 2%, depending on term lengths, and it is exempt from state and local taxes), while corporate bonds pay taxable interest and can have maturities ranging from a few weeks to 100 years.

Before purchasing bonds, make sure you know what you’re getting into — and what you will get out of it.

Read: How to buy bonds

3. Rental properties

Acquiring and maintaining rental property can require a lot more investment and sweat equity than other types of passive income, both upfront and over the years (if the roof leaks or the boiler breaks down in a rental property, you’re on the hook for it). But rental properties can also provide lucrative, ongoing income for many years to come.

“Rental properties in a market you understand can be a fantastic passive investment,” says Jeffrey Zucker, a seasoned angel investor and property management entrepreneur in Chicago. “I look for large or fast-growing housing markets, where people are clamoring for affordable, nice places.”

Before purchasing a property, Zucker recommends comprehensive due diligence to ensure that you can cover your costs — which likely include insurance, taxes and maintenance — and turn a profit on top of that. You want to invest in a property that will draw continued interest from renters and increase in value.

He also recommends using an experienced property manager. “There are some great property management companies out there that can assist to make leasing out rental properties truly passive mailbox money,” Zucker says. “Having managed our own properties for a few years prior to partnering with a company, we learned the long hours and effort that go into maintaining properties and dealing with tenants — and how much better those who focus solely on this role are at the job.”

4. Rewards credit cards

This might seem like an odd addition — and this is not a strategy to pursue unless you are able to pay off your bill in full each month. However, if you can use credit responsibly and avoid racking up debt, rewards credit cards can provide easy income, thanks to perks like cash-back bonuses. For instance, use a cash-back card for all your household expenses — and pay it off at the end of the month — and you’ll earn money simply by making necessary purchases. (Ferrantino recommends a card like the PenFed Platinum Cash Rewards Visa, which gives you 5% cash back on gas purchases and another 3% for groceries and has a low annual fee. NerdWallet also has a ranking of the best cash-back cards, including several with no annual fee.)

“My rewards have paid for a variety of travel experiences, and I have friends that use their points to pay exclusively for a certain [budget] category, like gas or household bills. It’s nice for them to cross an expense off simply by doing all of their planned spending on the right card,” Zucker says. “Be careful though, as many of the best rewards cards have high interest rates for any carry-over debt.”

5. Peer-to-peer lending

Also known as “marketplace lending,” peer-to-peer lending is the practice of individuals lending money to others in place of a bank or other financial institution. In recent years, platforms like Prosper and Lending Club have made these crowdfunded loans more widely available to borrowers and opened the possibilities for investors.

“New, technology-driven intermediaries have been coming in and replacing banks to make small loans to businesses or individuals, and they offer many comparative advantages,” Brown says.

Remember, though, that while investing through a peer-to-peer marketplace can pay off—Prosper investors, for example, can earn about 5% to 9% annually—there are still risks involved and borrowers may default on their debts. One way to protect yourself, Brown says, is by requiring that borrowers’ credit quality is above a certain level, depending on your appetite for risk. You can also reduce risk by diversifying your investment across many different loans.

6. Renting unused space
The sharing economy is in full force, and if you have extra space in your home or spend a lot of time out of town, you can join in and earn some extra cash. Thousands of people are renting out their homes through Airbnb, and sites like Liquid Space and Breather offer opportunities to place your office or home up for rent during daytime hours. (Airbnb hosts renting a single room in a two-bedroom home cover, on average, a whopping 81% of their rent, according to one report.)

“Any unused space is an asset worth renting out if there is demand in your market,” Zucker says. “[Online marketplaces] offer consumers easy ways to make some extra money on rooms that would otherwise be doing nothing for them.”

5 Things to Know About the Global Coffee Pods Market

Thanks ; 
Published ; May 8th, 2017

Euromointor International discusses five key trends that are shaping global coffee pods, including the growing power of Nestlé and JAB Holdings and the importance of addressing sustainability concerns.

5 Things to Know About the Global Coffee Pods Market

 

 

 

*a coffee pod is a single serving of coffee packed in its own filter (much like a tea bag).

Three Reasons Why Japan Is Falling Behind in Mobile Commerce

Thanks; 
Published; April 22nd, 2017

Many see Japan as a technology leader in various industries and the country is continuing to develop innovative solutions in the digital space. However, if we look at adoption of technology on the consumer side, there is greater inconsistency than might be expected.

Euromonitor International’s 2016 Digital Consumer Index unveiled a remarkable gap between Japan’s advanced digital environment and the slow uptake of digital commerce, particularly with mobile-based purchases that are increasing rapidly in other Asian countries. Whilst mobile digital purchases registered strong 17% value growth in Japan in 2016, other Asian countries registered even stronger growth, at a minimum of 30%. The leader of mobile digital purchases, China, saw an 81% value increase in 2016. This analysis aims to explore major impediments that are keeping Japan from what should perhaps be phenomenal growth in mobile digital purchases.

mobile-purchases-asia-pacific

CHART 1 : MOBILE DIGITAL PURCHASES IN ASIA PACIFIC, TOTAL VALUE SALES, 2013-2021

1. DEMOGRAPHIC CHALLENGE: LOW PENETRATION OF SMARTPHONES AMONG SENIORS

Smartphones are the catalyst for digital disruption in countries. The leading digital commerce marketplaces have developed platforms optimised for mobile apps. However, in Japan, smartphones are not as ubiquitous as one would expect. In Japan, the population aged over 60 accounts for 34% of the total population, and is characterised by low smartphone penetration. Only 28% of respondents aged over 60+ owned personal smartphones, according to Euromonitor International’s 2016 Global Consumer Trends Survey. This is extremely low compared to other Asian countries. Against the backdrop of low smartphone penetration among seniors, there also is a strong presence of feature phones that offer fewer functions in exchange for ease of use. As a result, a sizeable portion of the Japanese population is unable to take advantage of digital innovation.

CHART 2 : POPULATION AND SMARTPHONE OWNERSHIP IN JAPAN, 2016

population-smartphone-owners-japan

2. LIFESTYLE CHALLENGE: HIGH SECURITY CONCERN AMONGST JAPANESE CONSUMERS

In addition to the relatively conservative nature of Japanese consumers, there also has been a lot of media coverage on cybersecurity from the early digital era, which has made consumers concerned. For example, Consumers Affairs Agencies regularly warns against cyber-crimes due to the growing prevalence of e-commerce. As a result, Japanese consumers are highly concerned about the potential risk in online activities. In fact, only 6% of Japanese online respondents answered that they were willing to share personal information online, which was the lowest in 20 responding countries, according to Euromonitor International’s 2016 Global Consumer Trends Survey.

This hesitation toward sharing information online is especially true with mobile users. Many Japanese consumers utilise long commuting time on trains for mobile activities, but still feel uncomfortable entering their credit card information aboard a busy commuting train, afraid that other riders may see their personal information on the screen. Additionally, many are reluctant to let mobile devices store payment information, and would rather use alternative payment options, such as cash on delivery. In general, Japanese consumers are typically risk-adverse, and remain cautious about making payments on websites. Despite the rise of card payments worldwide, Japanese consumers bucked the trend, opting to more often pay for purchases with cash compared to other developed countries. Within Asia, while 85% of mobile remote orders were paid online in South Korea, only 51% were paid in Japan.

CHART 3 : WILLINGNESS TO SHARE PERSONAL INFORMATION IN ASIA PACIFIC, 2016

willingness-to-share-personal-information-japan

3. COMPETITION: MATURITY OF EXISTING SHOPPING OPTIONS VERSUS MOBILE COMMERCE

Another reason why mobile digital purchases have struggled to gain wider acceptance in Japan is due to the many other shopping options that Japanese consumers already have. One example of competition for mobile proximity payments is maturity of contactless payments using a physical card. This is because in Japan, consumers prefer to use a physical card to touch an NFC-enabled terminal rather than a device. Therefore, many mobile proximity payment brands such as Suica and Edy also offer consumers physical cards along with the digital payment option. Contactless smart cards, registered a 26% value CAGR during 2011-2016, and in 2016 Japanese consumers held an average of three contactless smart cards per person; far higher than in other Asian countries. Without a compelling reason to switch from contactless smart cards to mobile proximity payments, most consumers are satisfied with using card-based tap-and-go payments in an in-person environment.

SUMMARY

The gap between the advancement of mobile-centric products and actual adoption of mobile commerce amongst consumers is something businesses in Japan need to address. Communication with the customer or data collection made via mobile devices can be valuable, but is currently ineffective due to this gap. Over the forecast period, mobile digital purchases in Japan will continue to face these demographic, lifestyle and competitive obstacles.

However, there are positive developments that can help drive mobile commerce. For example, 2019 will be the first year with production of feature phones planned to be discontinued. Following the increase of low-cost smartphone plans, a switch from feature phones to smartphones can be expected. Moreover, solutions are being introduced in response to the high security concerns among Japanese consumers. For example, the mobile-focused fashion marketplace called ZOZOTOWN, implemented a post-pay product in 2016. GMO post-pay allows ZOZOTOWN customers to make post-pay options by cash, at convenience stores, after safely receiving their products. This is important as in Japan, credit card payments are mostly paid in full each month. Therefore the introduction of post-pay service will lower the hurdle and expand mobile remote purchases for those consumers who can only spend a limited amount of money each month, such as students and housewives. The post-pay options will support expansion of remote purchases while also meeting the demand of the cash-driven society.

Recognising the gap between digital connectivity available and digital commerce uptake, digital innovators and promoters like Suica should make concerted efforts to address concerns among Japanese consumers while promoting mobile digital purchases like Mobile Suica. Although mobile digital purchases in Japan is expected to see a strong 11% value CAGR at constant 2016 prices over the next five years, growth could be even stronger with consumers’ greater acceptance. In fact, other Asian countries are expected to see more than 20% value CAGRs. If Japan wants to remain a digital leader, its wider society needs to be incentivised to adopt mobile technologies. At the moment, it isn’t empowered – or interested enough.

 

Event Preview: InnoPack F&B Confex 2017

Thanks;
PUBLISHED; March 18th, 2017

Water-Bottles

The Packaging industry continues to post strong growth in India. Packaging for Foods is the largest industry in the overall industry. India has continued to be the third largest market globally for Food Packaging in terms of Retail/off-trade Unit Volume. The region also is the eight largest in beverage packaging in terms of total volume.

Given the opportunities it presents we have partnered with UBM India for the 2017 edition of InnoPack F&B Confex organised by UBM India. This is scheduled on the 11th – 12th April, 2017 in Gurgaon, India. This event strives to present a platform for F&B professionals to network, exchange ideas and knowledge, form future alliances and forecast new opportunities for the F&B packaging industry, in the dynamic economic environment.

CONSUMER’S EVOLVING PURCHASING PATTERNS

In addition to demographic changes, the packaging industry in India is also having to respond to changes in the way consumers shop. Strategies have to be adapted to suit urban and rural areas, and also vary across regions in India. Many lower-income demographics are paid on a daily basis and can only afford to shop daily preferring local convenience stores as opposed to shopping on a weekly basis in city centre supermarkets.

Several more consumer specific trends will be addressed by the industry with discussions on – Understanding the F&B packaging based on consumer purchase decisions and Recent updates on the regulations in food and beverage packaging.

GREEN AND SUSTAINABILITY

As the world consumes more resources than it can produce, there is an impetus to push away from a linear economy based on a make/use/dispose model and towards a circular economy based on a reduce/reuse/recycle model that focuses on minimizing waste and recycling or reusing all end products.

A focused conversation – Evaluating different ways to implement sustainable packaging and sustainable printing for food and beverage Industry will also be part of the two day event.

HEALTH TREND, SNACKING AND PACKAGING

The health and wellness trend also encouraged the use of packaging innovation by brand owners in flavoured milk drinks, cheese, processed meat, and fruit and vegetables in developing a snacking product. Strengthening of the snacking trend, led to biscuits, snack bars, confectionery and baked goods overall providing the biggest incremental growth for packaging in foods. Flexible plastic, as a widely used snack pack solution for products such as toffees, caramels, nougat and sweet biscuits, will benefit the most to 2020.

Some of the conversations which would deliberate further on trends include – Exploring the new ways of packaging designs used for food and beverage packaging to attract the customers and Maximizing brand image through packaging.

President Trump looms large over stocks despite deluge of earnings

THANKS;Sue Chang

Published: Feb 4, 2017 8:09 a.m. ET

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President Donald Trump is keeping investors on their toes.

It may be peak earnings season but the stock market’s main obsession seems to be President Donald Trump. And as investors continue to second guess his next move and decipher what his policies may mean for the economy, equities are likely to continue taking their cue from politics.

In a sign of how large the president looms over the market, an analysis of FactSet data by MarketWatch shows that one out of four companies referenced Trump during their most recent earnings conference calls. Much of the discussion appears to be driven by questions over the impact his policies will have on each company within the context of growth and trade, underscoring the apprehensive mood in the market.

That sense of uncertainty, in part, hobbled the market for much of the week as major indexes languished. The S&P 500 moved less than 0.1% in either direction for three straight days this week, the first such streak since November 2014, according to Dow Jones data.

Analysts blamed the market’s lackluster action on the absence of specific details from Trump’s administration even as the president moved quickly to fire off a string of executive orders on everything from a temporary immigration ban to withdrawing from landmark trade pacts.

The lack of clarity is likely to be an ongoing feature, forcing the market to fly blind, at least until April when the budget is released, said Steven Ricchiuto, chief economist for Mizuho Securities USA.

In the meantime, Ricchiuto urged investors to think outside of the box when it comes to Trump, adding that he’s smart enough to pull off many of his campaign pledges.

“Making the assumption that he is stupid is wrong,” said Ricchiuto, who believes Trump’s actions, no matter how irrational they appear to some, are governed by his background as a real estate developer.

“He will always start from a position of power and then moderate to a different position,” he said.

The Dow Jones Industrial Average DJIA, +0.94%  advanced 186.55 points Friday, or 0.9%, to close at 20,071.46 but slipped 0.1% for the week while the S&P 500 SPX, +0.73%  rose 16.57 points, or 0.7%, to 2,297.42 for a weekly gain of 0.1%, shrugging off its torpor after Trump took steps to overhaul Dodd-Frank law governing the financial industry.

Market sentiment remains bullish even as “Trump fatigue” sets in with Bank of America Merrill Lynch’s Bull & Bear Indicator rising to its highest in 2.5 years, according to the investment bank.

MW-FF149_BAML02_20170203172302_NS.png

Next week, 84 S&P 500 companies are scheduled to report quarterly results. The FactSet scorecard on fourth-quarter earnings shows 65% of S&P 500 companies beat mean earnings-per-share estimates and 52% have turned in better-than-expected sales.

Apart from earnings, financial stocks are likely to take center stage as expectations of a watered-down Dodd-Frank will be a boon for the industry, which had been chafing under the restrictions placed in the aftermath of the financial crisis.

Under former President Barack Obama, regulators have applied financial rules under the most severe interpretations. Under Trump, they are likely to look for the most lenient, said Ricchiuto.

These are the 10 best and 10 worst U.S. stocks of 2017

Freeport-McMoRan’s stock has extended last year’s 95% increase.

Thanks;Philip van Doorn

Published: Jan 9, 2017 4:10 a.m. ET

The benchmark S&P 500 Index has produced a 1.7% return in this year’s first week of trading

Fully updated with market close information.

After the S&P 500 returned 12%, with dividends reinvested, in 2016, the benchmark index is up 1.7% this year.

All 11 sectors of the S&P 500 SPX, -0.09% are up so far in 2017, with health care the best performer, rising 2.9%. The weakest sector is utilities, which has eked out a gain of 0.5%.
And despite the pain for several large retailers suffering holiday-sales declines, the consumer-discretionary sector is up 2.3% on reports of the best overall holiday sales in years.
Here are the 10 S&P 500 stocks that have gained the most so far this year:
Company Ticker Industry Price increase – 2017 Total return – 2016

Alexion Pharmaceuticals Inc. ALXN, -0.27% Biotechnology 17% -36%

Freeport-McMoRan Inc. FCX, -0.40% Precious Metals 13% 95%

Arconic Inc. ARNC, -0.82% Aluminum 11% N/A

Frontier Communications Corp. FTR, -1.87% Telecommunications 11% -20%

Mattel Inc. MAT, -0.07% Recreational Products 11% 6%

Illumina Inc. ILMN, -0.24% Biotechnology 11% -33%

TripAdvisor Inc. TRIP, -0.20% Consumer Services 9% -46%

NRG Energy Inc. NRG, -0.07% Electric Utilities 9% 6%

AmerisourceBergen Corp. ABC, +1.19% Medical Distributors 8% -23%

Total System Services Inc. TSS, +1.77% Data Processing Services 8% -1%

Source: FactSet

Here are the 10 S&P 500 stocks with the largest declines so far this year:

Company Ticker Industry Price decline – 2017 Total return – 2016
Xerox Corp. XRX, -0.14% Commercial Services -20% -15%

Kohl’s Corp. KSS, -0.72% Department Stores -16% 8%

Macy’s Inc. M, -0.26% Department Stores -14% 7%

L Brands Inc. LB, +0.67% Apparel/ Footwear Retal -7% -27%

Signet Jewelers Ltd. SIG, -1.44% Specialty Stores -6% -23%

Southwestern Energy Co. SWN, -3.02% Oil and Gas Production -5% 52%

Nordstrom Inc. JWN, +0.18% Apparel/ Footwear Retail -5% -1%

Tesoro Corp. TSO, -2.05% Oil Refining/ Marketing -4% -15%

Kroger Co. KR, -0.79% Food Retail -4% -16%

Urban Outfitters Inc. URBN, -1.86% Apparel/ Footwear Retail -4% 25%

Source: FactSet

The 25 most economically powerful cities

THANKS    ;Mike Bird

Published  ;Sep 25 2015

Global-Financial-Systems_GM1E9590E6P01_Wall-street-sign1-628x330

Posted by Mike Bird – 15:56

There’s fierce competition among the world’s most powerful and influential cities, and there are a lot of questions: Are the megacities cropping up in the developing world displacing the western world’s hubs? Does London or New York come out on top?

CityLab and the the Martin Prosperity Institute have teamed up to compile a ranking of the 25 most economically powerful cities in the world today.

They’ve based it on four major factors: Overall economic clout, equity and quality of life, financial power and global competitiveness. Their estimates for these are drawn from a bundle of different sources.

There are some surprising cities pretty high up on in the ranks, and you can check where they all sat three years ago when the list was last made. Some have surged up the ranks and some have dropped back considerably.

1. New York (1st in 2012)

2. London (2nd in 2012)

3. Tokyo (3rd in 2012)

4. Hong Kong (4th in 2012)

5. Paris (4th in 2012)

6. Singapore (7th in 2012)

7. Los Angeles (9th in 2012)

8. Seoul (11th in 2012)

9. Vienna (unranked in 2012)

10 (tie). Stockholm (unranked in 2012)

10 (tie). Toronto (18th in 2012)

12. Chicago (6th in 2012)

13. Zurich (10th in 2012)

14 (tie). Sydney (unranked in 2012)

14 (tie). Helsinki (unranked in 2012)

16 (tie). Dublin (unranked in 2012)

16 (tie). Osaka-Kobe (15th in 2012)

18 (tie). Boston (11th in 2012)

18 (tie). Oslo (unranked in 2011)

18 (tie). Beijing (11th in 2012)

18 (tie). Shanghai (8th in 2012)

22. Geneva (unranked in 2011)

23 (tie). Washington (14th in 2012)

23 (tie). San Francisco (unranked in 2012)

23 (tie). Moscow (unranked in 2012)

This article is published in collaboration with Business Insider. Publication does not imply endorsement of views by the World Economic Forum.

To keep up with the Agenda subscribe to our weekly newsletter.

Author: Mike Bird is a European markets editor, working from London and covering financial and economic issues.

Image: A street sign for Wall Street hangs in front of the New York Stock Exchange. REUTERS/Lucas Jackson.

The U.S. Supreme Court and LGBT Rights

Thanks;IIP DIGITAL

04032014_AP209256454344_jpg_600

The Supreme Court of the United States made two major decisions in 2013 that furthered equality for lesbian, gay, bisexual and transgender (LGBT) Americans. In one case, the Supreme Court overturned the Defense of Marriage Act (DOMA), a law passed by the U.S. Congress in 1996. At that time, as today, some U.S. states recognized same-sex marriages and others did not. Under DOMA, if a same-sex couple was married in a state that allowed such unions, the couple would not receive federal marriage benefits, including tax benefits, or be recognized as married by the federal government. In 2013, the Supreme Court ruled that DOMA violated the U.S. Constitution because it denied equal protection under the law to same-sex couples that are legally married in their state.

The second major case, Hollingsworth v. Perry, questioned whether same-sex marriage was legal in the state of California. After an appellate court decision, the Supreme Court decided that the sponsors of the suit had no standing to appeal the appellate decision, allowing the lower court decision to stand. This effectively made same-sex marriages legal in California.

The 2013 Supreme Court actions were milestones for supporters of LGBT equality, but there are still many challenges ahead. The DOMA decision, for example, only applies to same-sex marriages from states where same-sex marriages are already legal. The law still allows states where same-sex marriages are illegal to not recognize same-sex unions from other states.

 

China Says “No” To Virtual Credit Cards

Thanks;Gordon Orr
Chairman, Asia at McKinsey & Company

20140319-231822.jpg

The end of last week saw the Chinese central bank intervene to shut-down an innovative online service of virtual credit cards

, launched by Tencent and Alibaba, in conjunction with Citic Bank. This move came the day after the services were launched, which seemed a little odd – why did they allow something to go to market rather than intervene to halt the services before they could be launched?

The answer lies in a combination of the absence of regulation or policy in some parts of the banking sector, and the willingness of the large Internet players to take the absence of prohibition to mean permission, so that they have largely been pushing into financial services with a logic of “if enough scale with enough satisfied customers can be reached quickly”, then it’s too late for the regulator to shut them down. These virtual credit cards, which would have bypassed the state-owned quasi monopoly, China UnionPay, was another move in this direction.

Unlike with online wealth management products, the government intervened fast when it learned of the launch of the credit cards. Now, perhaps, the regulators can say they have caught on to the tip of the tail of the dragon that is innovation in Chinese financial services today, and going forward, it will be seeking to impose more classic banking-style regulation on the new, online private Chinese banks.

Yet sustaining a balance that works for all will be incredibly hard – investors clearly love the online options – more than 80 million have signed up in less than a year, and according to reports, 3% of Chinese deposits have shifted to their products in one month in 2014. Incumbent state-owned banks have deeply rigid fixed cost structures, meaning that even if they do offer identical online services, they will be at higher cost. Being a financial services industry regulator in China today may be one of the hardest jobs around.

With all the turbulence in China’s banking sector, I took a look at the share price trend of the big 4 banks. Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC) were listed back in 2006; China Construction Bank (CCB) in 2007; and Agricultural Bank of China (ABC) in 2010. Today, only ICBC’s share price is above its listing price – and that by a slight 2%. BOC is down by 27%, CCB by 54% and ABC by 15%.

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Much of the decline has come in the last few years on the back of investors’ concerns over how these mammoth state-owned institutions could reinvent themselves as their industry changed. Firstly, they had to face up to the reduction in spread between lending and deposit-taking as rate setting has gradually shifted to the market. Secondly, the market sees the banks as the deep pockets likely to be called on if more trust products get into trouble.

And thirdly, the impact of Alibaba and Tencent, with their ability to attract billions of dollars of deposits and tens of millions of clients in only a few months, and to innovate seemingly at will, leaves investors looking at the big 4 as legacy banks with legacy fixed assets and people that make it very hard to reinvent themselves into the kind of financial institutions that Chinese consumers clearly want to deal with today.