16 WE ARE KENANGA LEADERSHIP MESSAGE VALUE CREATION MODEL KENANGA INVESTMENT BANK BERHAD ANNUAL REPORT 2023 GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS HARNESSING DIGITAL MOMENTUM In response to the dynamic financial landscape, Kenanga Group has been undergoing a digital transformation, strategically investing in cutting-edge technologies to future-proof our operations. We believe that this forward-looking initiative will ensure our readiness for future challenges, positioning us as industry leaders. Throughout this journey, Kenanga Group strategically ventured into various digital collaborations with partners such as, Merchantrade Asia Sdn Bhd (“Merchantrade”), Rakuten Trade Sdn Bhd, (“Rakuten Trade”), Tokenize Technology (M) Sdn Bhd (“Tokenize”), and Bay Group Holdings Sdn Bhd (“CapBay”), while fostering the growth of our organic digital platforms and businesses. A pivotal focus of 2023 was laying the groundwork with the introduction of the Kenanga SuperApp. This comprehensive digital investment hub aims to empower Malaysians with seamless access to diverse asset classes, complete portfolio visibility, and loyalty rewards through a convenient, and user-friendly platform. To maximise the SuperApp’s potential, the Group established Kenanga Digital Sdn Bhd (“KDSB”) as a dedicated entity. Positioned as a disruptive tech-first player, the SuperApp is aimed at attracting strategic investors who share our vision of democratising access to investments for all. We believe our key differentiation in this space stems from the range of investment licenses we possess and/ or have access to, which will enable us to create the first (1st) one-stop-center for all investment needs. In Phase 1 of the SuperApp, we will consolidate our offerings such as robo-advisory, cryptocurrency trading, e-wallet, and stock trading under one (1) roof. We are now actively pursuing regulatory approvals to distribute these products through the SuperApp. In addition, our commitment to technological advancement goes hand-in-hand with our embrace of Artificial Intelligence (“AI”) and Machine Learning (“ML”) across new business initiatives. Notably, our proprietary quantitative trading algorithms, powered by AI and ML, have already demonstrated success in trading and portfolio management, particularly through Kenanga Digital Investing’s (“KDI”) robo-advisory business. In 2023, we launched our Treasury FX platform, providing our clients with the capability to conduct seamless online foreign currency trades and transfer funds internationally. With zero transfer fee and competitive rates, this platform unlocks elevated convenience for those on the go and further democratises access to the foreign currency exchange market. The release of an updated version is expected in 2024. CORPORATE HIGHLIGHTS The Group, via our subsidiary, Kenanga Capital Sdn Bhd (“KCSB”) has completed the disposal of 31.0% stake in Kenanga Capital Islamic Sdn Bhd (“KCI”) to CapBay. Currently, KCSB holds a 20.0% stake in KCI, which is now an associate company of the Group. The disposal did not have a significant impact on Kenanga Group’s earnings and net asset value in FY2023. FINANCIAL POSITION As at 31 December 2023, Group and Company capital adequacy ratios were 29.4% and 31.6% respectively, which were in excess of the minimum regulatory capital adequacy of 10.5% set by Bank Negara Malaysia, including a capital conservation buffer of 2.5% if imposed. Liquidity Coverage Ratio was 280.5%, well above the regulatory requirement of 100%, while Net Stable Funding Ratio stood at 129.5%, above the mandatory minimum of 100%. The Group maintained A+ and MARC-1 ratings from the Malaysian Rating Corporation Berhad (“MARC”), which continued to note our strong competitive position, sound capital position, profitability, and funding profile despite weakened capital market conditions. As always, we remain committed to consistently enhancing our financial performance, while striving to maintain the highest ratings. For the same period, our subsidiaries Kenanga Investors Berhad and Kenanga Islamic Investors Berhad maintained MARC IMR-2 ratings, affirming our commitment to well-established investment processes and sound risk management practices.
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