Finance

For the Fed, implementing the easiest monetary policy in history was tough, so getting out will be difficult as well.
Investors on Friday will hear more on what Fed Chairman Jerome Powell thinks about the economy and monetary policy.
“Every Fed change in monetary policy is important,” said Priya Misra of TD Securities. “But I think it’s particularly more meaningful today because we know growth is slowing and the Fed is trying to exit.”

Federal Reserve Chair Jerome Powell testifies during a U.S. House Oversight and Reform Select Subcommittee hearing on coronavirus crisis, on Capitol Hill in Washington, June 22, 2021.
Graeme Jennings | Pool | Reuters

For the Federal Reserve, implementing the easiest monetary policy in the institution’s history was tough enough. Getting out will be no treat, either.
That is what the central bank faces on its road ahead.

Investors on Friday will hear more on what Fed Chairman Jerome Powell thinks about the economy. They’re also expecting to get at least a few more clues on how he will guide the central bank’s exit from the measures it took to rescue the nation’s economy from the Covid-19 pandemic. He will deliver a speech in conjunction with the Fed’s annual Jackson Hole conference, which again will be held virtually this year.
First on the Fed’s docket is pulling back on the money printing – the $120 billion or so of bonds it buys each month to stimulate demand and drive down long-term interest rates.
After that, the road gets rougher.
At some point, the Fed will look to raise short-term interest rates off the near-zero anchor where they’ve sat since March 2020. Getting rates back to normal didn’t end well for the Fed the last time it attempted to do so from 2015-18, as it had to stop in mid-cycle amid a slumping economy.

Hence, markets could be excused for being at least a little nervous this time around. The Fed not only has to turn around its most-aggressive easing policies ever, it must do so with precision and hopes that it doesn’t break anything in the process.

“Every Fed change in monetary policy is important,” TD Securities global head of rates strategy Priya Misra said. “But I think it’s particularly more meaningful today because we know growth is slowing and the Fed is trying to exit.”
Indeed, the economy is still well within a strong recovery from the depths of the pandemic, which yielded the steepest but shortest recession in U.S. history. But the rebound has seemed to at least be stalling. The Citi Economic Surprise Index, which measures actual data against Wall Street estimates, was at a record high in mid-July. But the index has now slumped to levels last seen in June 2020.
Fed officials themselves expect noticeably slower growth in the years ahead at a time when both monetary and fiscal policy will be tighter. That raises more questions about whether Powell and his cohorts can get the exit right.

Misgivings in the market

“Are they exiting at the right place? Are they exiting at the right time, at the right magnitude? Given the slowing of the economy, we have questions around both,” Misra said. “The market is pricing in a policy mistake.”
What Misra means by a policy mistake is that the current pricing in fed funds futures — the market that trades around the Fed’s rate moves — is indicating the Fed central bank will only be able to raise its rate a few times to maybe 1.25%. Then, it will have to stop as growth stalls.
Rates that low scare Fed officials because they give them little wiggle room to ease policy in times of crisis. That was around where the funds rate stood at the beginning of the pandemic crisis, coming down substantially from the 2.25%-2.5% target range where the Fed finished its last rate-hiking cycle in December 2018.
The calculus for how to manage it all will fall on Powell from a communication standpoint, and for the other Federal Open Market Committee members in terms of actual mechanics.
“Tapering is important because it’s a very good measure of not only the credibility of the Fed but in terms of communication, how good is the strategy and how transparent it is,” said Deepak Puri, chief investment officer for the Americas at Deutsche Bank Wealth Management. “In 2013, the Fed made mistakes in how to communicate on tapering.”
That 2013 episode — the so-called Taper Tantrum as it’s known now — is the only template the market has for how the Fed might proceed.
TD Securities’ Misra pointed out the Fed is already showing it learned a lesson from the earlier episode by easing the market into tapering. The 2013 proclamation from then-Fed Chairman Ben Bernanke was seen as abrupt, and it sent interest rates surging and stocks lower for several months.
“They’re doing a good job in the sense that they’re really trying to not surprise markets. That avoids a mistake they made in 2013. That’s a positive,” said Shawn Snyder, head of investment strategy at Citi U.S. Consumer Wealth Management. “They’re in a little bit of a tough position, because the delta variant is acting as a wildcard.”

Depending on the Fed

The Fed and markets have been joined at the hip for a long time, but especially in the era of quantitative easing and zero interest rates that began in 2008. Stocks slumped badly at the start of the pandemic but then rebounded as soon as the Fed ramped up the bond buying.
The market recovered its losses after the first taper began, and it kept climbing through the rate-hike cycle until late 2018, when a series of Powell communication missteps sent investors reeling.

Fed balance sheet, stock market soar

As the Federal Reserve built up its balance sheet, the S&P 500 index bounced back
from the Covid crash to reach record levels

Total assets of the Federal Reserve

Note: Shaded area represents U.S. recession. Fed balance sheet data is unadjusted.
Source: Board of Governors of the Federal Reserve System, via Federal Reserve Bank of St. Louis
(assets), FactSet (S&P 500). Data as of Aug. 18, 2021.

Fed balance sheet, stocks soar

As the Federal Reserve built up its balance
sheet, the S&P 500 index bounced back
from the Covid crash to reach record levels

Total assets of the Federal Reserve

Note: Shaded area represents U.S. recession. Fed
balance sheet data is unadjusted.
Source: Board of Governors of the Federal Reserve
System, via Federal Reserve Bank of St. Louis
(assets), FactSet (S&P 500). Data as of 8/18/21.

Fed balance sheet, stock market soar

As the Federal Reserve built up its balance sheet, the S&P 500 index
bounced back from the Covid crash to reach record levels

Total assets of the Federal Reserve

Note: Shaded area represents U.S. recession. Fed balance sheet data is unadjusted.
Source: Board of Governors of the Federal Reserve System, via Federal Reserve
Bank of St. Louis (assets), FactSet (S&P 500). Data as of Aug. 18, 2021.

On the economy, Fed officials have put less stress on their policies and more on fiscal aid and the path of the virus.
Covid-19 is casting some doubt on where growth is headed. But several regional Fed presidents who spoke to CNBC this week said the virus seems to be having little impact on growth and for now isn’t weighing on their economic forecasts.
“Consumers and businesses are becoming more adaptable, more resilient, and I think people are expecting that [the virus] is going to go in fits and starts,” said Dallas Fed President Robert Kaplan, one of those in favor of removing policy soon though slowly.
The informal consensus now in the market is that the Fed starts tapering before the end of the year and wraps up the process in eight to 10 months. After that, it will evaluate where things stand before moving on rates.

Landmines for Powell

Complicating matters for Powell are some touchy political dynamics inside and outside the Fed.
The rising hawkish bent from regional presidents such as Kaplan and James Bullard at the St. Louis Fed is clashing with more dovish members such as Governor Lael Brainard and San Francisco Fed President Mary Daly.
On top of that, Powell is up for renomination in February — as are several other Fed officials — and President Joe Biden has not made his preferences known yet. Powell already knows what it’s like to be leaned on to keep rates low after his experience with former President Donald Trump. But to some extent, he will still have to herd cats to keep a Fed consensus together as economic and pandemic conditions shift.

An image of U.S. President Joe Biden is broadcast on a screen after his address to the nation regarding the situation in Afghanistan as traders work on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 17, 2021.
Andrew Kelly | Reuters

“The worry for both the Fed and economy is the danger of applying political pressure to get outcomes that one desires on the political spectrum, and thus undermining the Fed’s independence,” former Philadelphia Fed President Charles Plosser told CNBC in a broadcast interview. “Powell’s in a delicate spot.”
For his part, Powell used his 2020 Jackson Hole speech to outline a dramatic shift in policy regarding the way the Fed views inflation. The new framework reflects a desire to achieve full and inclusive employment even if that means running inflation hot. The policy has been blamed in some quarters for surging prices this year.
“We are in a period of time where monetary and fiscal policy are at its most stimulative level we’ve seen in 75 years,” Plosser said. “They need to ask the question, what role does policy play in making this inflation more persistent than it otherwise would prove to be.”
Powell’s speech Friday is expected to yield no such major breakthroughs in the Fed approach, focusing instead on current and future expected conditions with a little hint of how policymakers will try to manage it all.
But it likely will set the stage for how the central bank gets back to normal, so the pressure will still be on.
“The real question to me is what happens next year,” Citi’s Snyder said. “Do we found ourselves looking at moderating economy and moderating inflation that will make it difficult for the Fed to achieve liftoff on rates? … I think people are very worried about the idea that maybe this isn’t going to work out the way we planned.”

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Two trusted deputies of Bank of America CEO Brian Moynihan will depart at the end of the year, setting up a succession race among the company’s top managers.
Tom Montag, 64, who is chief operating officer and leads the global banking and markets division, as well as Anne Finucane, 69, the bank’s vice chairman, are both retiring, the bank said Thursday in a release.

Thomas Montag
Source: Bank of America

Two trusted deputies of Bank of America CEO Brian Moynihan will depart at the end of the year, setting up a succession race among the company’s top managers.
Tom Montag, 64, who is chief operating officer and leads the global banking and markets division, as well as Anne Finucane, 69, the bank’s vice chairman, are both retiring, the bank said Thursday in a release. The Charlotte, North Carolina-based firm is the second biggest U.S. bank by assets.

Montag was considered the obvious candidate to replace Moynihan should circumstances require it. He joined Bank of America in 2008 through its acquisition of Merrill Lynch during the financial crisis, but had spent the bulk of his career as a Goldman Sachs trading executive.

Anne Finucane
Cameron Costa | CNBC

As vice chairman, Finucane was responsible for the company’s strategic positioning, as well as its environmental, social and corporate governance, or ESG, and public policy efforts. But her sway within Bank of America extended well beyond her job title. A 26-year veteran of the firm, she was known as a highly-connected confidante to Moynihan and his predecessor.
In fact, Moynihan once joked that “We all report to Anne.”
“Anne has been a trusted advisor and invaluable partner for many years,” Moynihan said in the release. “From her time as one of the few senior women executives in financial services to today, she has provided unparalleled strategic vision, helping to make banking more transparent, while serving as a tireless advocate for equality, sustainable energy, education and health care.”
While the company has a CEO succession plan in place, Moynihan has said publicly that he hopes to continue running Bank of America for years to come. Successors to Montag and Finucane will be announced in coming weeks, the firm said.

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Dallas Federal Reserve President Robert Kaplan told CNBC he would like to see tapering of bond purchases announced in September.
He said he is worried about inflation as well as financial market imbalances.

Dallas Federal Reserve President Robert Kaplan would like to see the central bank announce next month that it will begin tightening its policy reins.
Among his reasons is a general belief that the economy can withstand a little less help from the Fed. But Kaplan also said he’s concerned about inflation and “excess risk taking” that has led to “distortions” in financial markets, particularly in bonds.

“Based on everything I’ve seen, I don’t see anything at this point that would cause me to materially change my outlook,” Kaplan told CNBC’s Steve Liesman. “It would continue to be my view that when we get to the September meeting, we would be well served to announce a plan for adjusting purchases and begin to execute that plan in October or shortly thereafter.”
Kaplan spoke of the Fed’s critical “taper” question – when it will be appropriate to start pulling back on the $120 billion a month of bond purchases it has been engaged in since the early days of the Covid-19 pandemic. His remarks come a day ahead of a closely watched speech from Fed Chairman Jerome Powell who will speak as part of the virtual Jackson Hole symposium.
Earlier in the day, CNBC aired an interview with Kansas City Fed President Esther George, who expressed similar sentiments that she sees the taper starting soon. St. Louis Fed President James Bullard was even more hawkish in remarks to CNBC.
Both said that while rising Covid cases, and its delta variant, are a concern, they don’t seem to be having much impact on the economy in a broad sense.
“What we’re seeing is businesses and consumers are learning to adapt and go on with their lives, and they’re realizing that this is not going to be neat and clean or a straight line,” Kaplan said. “It’s going to go in fits and starts, and they’re getting adjusted to that reality.”

However, he is concerned with the impact that ultra-loose Fed policy is having on the economy.
Inflation has been running around multidecade highs in 2021, and Kaplan said rising gas and housing prices are affecting the lower-income communities in his district.
“What we’re seeing in these communities is inflation affects them disproportionately,” he said. “I think at the Fed we have to take that very seriously.”
Kaplan cited the knock-on effects that high housing prices are having on rents.
He also said he is seeing high levels of risk-taking, particularly in the high-yield end of the fixed income markets.
For both those reasons, he thinks it’s time for the Fed to dial back its accommodation.
“I think we’ll be a lot healthier if we could soon wean off the purchases, and it will put us in a lot better position going forward,” he said.

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THE PRIDE of Russian nationalists was sorely wounded as the Soviet Union crumbled. Russia without communism was not just more like its foe the West, but the country also became beholden to Western financial architecture as it adopted capitalism. Visa and Mastercard established a comfortable bank-card duopoly. And SWIFT, a Belgian interbank-messaging network, was enlisted for domestic trans actions as well as cross-border ones.Yet it was not until the annexation of Crimea in 2014 that these indignities came to be seen as acute vulnerabilities. America and Europe imposed sanctions that were designed to hurt misbehaving Russian banks and President Vladimir Putin’s cronies. Visa and Mastercard briefly blocked cards issued in Crimea or by blacklisted banks. American senators and the European Parliament called for Russia to be cut off from SWIFT (though it remains connected). The ensuing economic crisis “triggered innovation and what-if thinking”, says Tom Keatinge of the Royal United Services Institute, a think-tank. The central bank now publishes regular reports about its strategy for “payment sovereignty”.Central to that plan is a homemade rival to Visa and Mastercard. The central bank set up a payments system (NSPK) with its own card, named Mir (“world”, or “peace”, in Russian). Legislators passed a law forcing Visa and Mastercard, in effect, to have their payments processed at a clearing-house owned by the Russian payments system. In 2019 the NSPK made 11.9bn roubles ($160m), or three-quarters of its revenue, from charging clearing fees to foreign card brands. These proceeds have allowed it to lower Mir’s commission rate to 0.8%, well below the typical credit-card interchange fee of 1.2-2% in Russia.Pensioners and civil servants are required to receive their incomes on a Mir card. Businesses must accept payments from it. Seven years after its launch Mir accounts for 30% of cards issued in Russia (and 24% of total transaction value). Last month it had about 100m cards in circulation. On July 20th Mir announced that it was connected to Apple Pay—a big deal, given that mobile phones make up 60% of contactless payments in Russia.Mir wants even more. It bombards Russians with promises of special treatment if they switch cards. A ride on the St Petersburg metro is roughly half price when the commuter taps a Mir card at the gates. A “cashback” scheme offers a 20% discount on any holiday inside Russia booked with Mir. On August 17th Wildberries, Russia’s answer to Amazon, began charging Visa and Mastercard users an extra fee of 2%.Outside of Russia, though, Mir does not fulfil its worldly ambitions. Most banks abroad do not accept it (Turkey, the most popular tourist spot for Russians, is an exception). Efforts to produce a version of the card co-badged with Mastercard’s Maestro brand, which would see it accepted more widely, have not solved the problem. Similar obstacles abound for another central-bank creation, SPFS, the analogue for SWIFT. It manages just a fifth of the domestic traffic that SWIFT handles. And only a measly 12 foreign banks, including ones based in Belarus and Kazakhstan, are linked up (compared with 11,000 worldwide for SWIFT), making it all but useless for foreign transactions. Banks must bear the costs of adopting SPFS, but have little incentive to do so while SWIFT still works.Nonetheless, both have their value at home. They reduce the risk of chaos if Russia loses access to Western plumbing. Mir also serves to protect the banks and businessmen that sanctions were meant to hurt. Take Bank Rossiya, “a huge linchpin in the Russian patronage network”, according to Brian O’Toole, a former sanctions architect with the American government. The bank was cut off from the Western financial system in 2014, including from Visa and Mastercard. That hurt. But Mir helps keep the bank humming away.Observers argue that America faces a blacklister’s bind: the overuse of sanctions as a tool of foreign policy might prompt targets to develop a parallel financial system, undermining not only the sanctions but Western power itself. Russia’s payments innovations certainly suggest some truth to the first bit of the theory. Still, the global might of the West’s financial architecture remains daunting. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Homegrown fare” More

NOBODY BOUGHT Japan’s ten-year government bond in over-the-counter trading on August 3rd. Such a lull in the world’s second-largest market for sovereign bonds would once have been remarkable. But in fact this was not even the first time activity dried up. Once-frenetic trading desks in Tokyo have fallen silent over the past half-decade.Sceptics of the central bank’s enormous quantitative-easing (QE) programme warned this moment would come. With the Bank of Japan (BoJ) hoovering up securities, they argued, benchmark bonds would become scarce, causing price volatility and stopping investors pricing risks properly. Financial institutions would be deprived of the collateral they needed to operate. But, curiously, there is little sign that the drying up of the Japanese market has had such effects. Should anyone, other than the poor souls who used to buy and sell the bonds for a living, lose sleep over it?Perhaps nowhere is more central to the history of QE than Tokyo. During the Depression of the 1930s the country’s finance ministry arranged for the BoJ to underwrite all government-bond issuance. In 2001 Japan became the birthplace of modern QE when the BoJ launched a small asset-purchase scheme.The scale of bond-buying over the past eight years in particular has been astonishing. The BoJ’s assets run to around 130% of GDP, nearly twice the share held by the European Central Bank and nearly four times that of America’s Federal Reserve. The BoJ holds almost half of Japan’s sovereign bonds (and, after years of sluggish economic growth, which have obliged the government to run budget deficits, the country has rather a lot of them). These have largely been bought from commercial banks—both domestic ones and foreign lenders based in Japan. In 2012 banks owned over 40% of the stock of government bonds; now they own less than 13%. Since they typically do a lot of bond trading, it might come as no surprise that activity has dried up like a dammed stream.To its critics Japan’s experience of bond-buying as the main form of economic stimulus discredits the policy tool. The huge asset purchases since 2012 have clearly not achieved the aim of generating sustained inflation. Even the BoJ does not believe it will reach its 2% inflation target before 2024.Yet there also seem to have been few of the negative market consequences that critics feared. Bond dealers bleat about liquidity in surveys, but bid-ask spreads—a measure of the gap between the price at which buyers are willing to buy and sellers are willing to sell—in the trading that does occur have been contained. Prices are kept in a stable band by the BoJ’s “yield-curve control” policy. Average private-sector lending rates are at rock-bottom levels. Large-scale quantitative easing may have made certain maturities scarcer, but that effect has been muted by the central bank’s willingness to lend bonds to the private sector through various collateral schemes. As pandemic panic peaked in March last year, the BoJ lent out more than ¥24trn ($221bn) in government bonds to the private sector, mostly to provide the collateral banks needed to access the Fed’s dollar-swap lines. While it may still be reasonable to worry about the effect of persistently low interest rates on asset prices and wider financial markets, in Japan at least worries about the functioning of the government-bond market have yet to be realised.The lack of any direct financial consequences of throttling activity in the bond market says something interesting about QE and monetary policy in general. Policy is usually regarded as being something that causes changes in the economy. But it is as much a consequence of existing economic reality.Movements in bond markets typically convey useful information about investors’ expectations for growth and inflation. But in Japan both are so consistently low that there is little useful information to be gleaned from a livelier market. QE may have helped kill off trading activity, but ultimately the euthanasia of trading desks, like the QE programme itself, is a consequence of a stagnant economy and static prices.That may be the best lesson for other countries—and, as the past 30 years have shown, what happens in Tokyo today is often repeated in the rest of the rich world tomorrow. Should they find themselves in similar economic circumstances, worrying about the effect of bond-buying on how the market functions may be the least of their concerns.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Closed for business” More

ONE OF THE questions gripping America is the extent to which generous unemployment benefits are distorting the economy. When covid-19 began to spread last year, Congress expanded unemployment insurance (UI) by topping up payments, allowing recipients to claim for longer and widening the eligibility criteria. The aid helped preserve incomes during lockdowns and fuelled consumer spending during the recovery. In March lawmakers extended federal funding for the benefits. But it is due to expire on September 6th—with consequences that are uncertain.One possibility is that the cliff-edge will bring people back to work. Although employment remains about 5.7m below its level in February 2020, firms are struggling to fill vacancies. In July wages in leisure and hospitality jobs were nearly 10% above pre-pandemic levels. Economic theory says that UI deters jobseeking—a prediction supported, at least to some degree, by most studies of its effects before 2020.Yet this relationship has not been apparent during the pandemic. Congress allowed states to opt out of the prolonged benefits this year. Over the summer 26 of them—mostly those with Republican governors—ended at least some benefits early. Their economies do not seem to have benefited much. Between June and July the share of working-age people who were employed rose by 3.5 percentage points in states that kept the benefits, exceeding the 2.7-percentage-point increase in states that cut them off.Several groups of researchers have struggled to unearth the expected correlation using more sophisticated methods. The latest attempt is by Kyle Coombs of Columbia University and co-authors, who studied the bank records of 18,000 low-income workers. They found that, in the states that ended benefits, 26% of workers who had previously received them were employed in August, compared with 22% in other states—a difference that, as a share of the entire labour force, is modest.The Economist has conducted its own analysis. The Census Bureau’s Household Pulse Survey (HPS) interviews tens of thousands of people each week about how the pandemic is affecting them. One of the questions is whether respondents have worked in the past week. We measured how the share of people aged 24-65 in each state who said they were working had changed since January. Using a technique called “difference in differences”, we compared average changes in reported employment rates in two groups of states, those that ended benefits early and those that had not. The numbers were virtually indistinguishable: in months when employment rose in cut-off states, it climbed by a similar amount in other states. The same was true when employment declined.The absence of large effects does not mean that previous beliefs about UI were wrong. The pandemic is a highly unusual period for the economy, meaning the effects of benefit cut-offs could take longer to appear. By making jobseekers choosier, higher UI may be boosting wages instead of limiting the employment recovery—which might sound desirable, but could be inflationary. In cut-off states the earnings of drivers on ride-hailing apps, which respond in real time to labour supply and have been falling lately, have declined by about 10% more than in other states, reckon economists at Goldman Sachs, a bank. The nationwide cut-off in September should, they say, increase labour supply and slow the pace of wage growth.One consequence of withdrawing benefits might not come as a surprise. It has left the jobless with less money in their pockets. Mr Coombs and his colleagues found that in cut-off states affected workers reduced their weekly outlays by $278. Our analysis of the HPS shows that the share of adults saying it was “somewhat” or “very” difficult to pay for typical household expenses began rising in cut-off states shortly before the expiry. Elsewhere, there was no change (see chart).That raises the possibility that cutting off benefits could harm overall consumer spending. But the numbers involved are puny: a $2bn fall between June and early August, compared with monthly aggregate consumer spending of over $1.3trn. The labour-supply effect should be more significant—if it shows up. ■This article appeared in the Finance & economics section of the print edition under the headline “Disappearing incentives” More

Razer, which makes laptops, PC peripherals and other products for gamers, is currently listed in Hong Kong.
But the company was founded in the U.S., where it also headquartered, and makes most of its revenue there.
Razer is having internal discussions on whether to pursue a listing in the U.S., CEO Min-Liang Tan said.

Tan Min Liang, the co-founder, CEO and executive director of Razer, at a press conference on the proposed listing of Razer at JW Marriott Hotel Hong Kong in Admiralty.
Dickson Lee | South China Morning Post | Getty Images

Gaming hardware company Razer is considering a secondary listing in the United States, CEO Min-Liang Tan told CNBC Thursday.
Razer, which makes laptops, PC peripherals and other products for gamers, is currently listed in Hong Kong. But the company was founded in the U.S., where it also headquartered, and makes most of its revenue there.

“I’ve definitely considered” a secondary listing in the U.S., Tan said in an interview. Gamers are asking “daily” why Razer doesn’t already trade on a U.S. exchange, he added.
Tan said the company was “in the midst of internal discussions” on whether to go public in the U.S. “We’ve got nothing to announce at this point in time but it’s something that we do look at.”
Razer is one of many gaming companies that have flourished during the coronavirus pandemic as lockdown restrictions led to a surge in activity.
The firm saw first-half revenues jump 68% to $752 million this year. Razer also swung to a net profit of $31.3 million in the first six months of 2021, rebounding from a net loss of $17.7 million in the same period in 2020.
“The vast majority of business is actually out of the U.S., followed by Europe, and then Asia,” which is “primarily” driven by sales in China, Tan told CNBC. “I would say the makeup is still 40-50% in the U.S.”

While Razer is mostly known for its hardware business, the company is also heavily investing in software and services.
Razer’s services division includes its Razer Gold virtual credits for gamers and Razer Fintech digital payments unit. The company recently shut down Razer Pay, its electronic wallet, to focus on processing payments for merchants.

Razer had been hoping to expand into retail banking but has scaled back those ambitions after failing to secure a license in Singapore, its Asian headquarters.
“We are now really focusing on scaling our B2B side of things,” Tan said, referring to business-to-business transactions. “Right now our focus really is to enable B2B for the fintech business and B2C [business-to-consumer] which is the virtual credits for the Razer Gold business.”

Exploring crypto

Razer’s online credits have previously been described as a “virtual currency” for gamers. However, Tan says the firm “spent a lot of time calling Razer Gold a virtual credit” as it must follow regulations.
Asked whether Razer Gold could become a cryptocurrency, like bitcoin, Tan said Razer was “interested” in the world of cryptocurrencies but had no immediate plans to make a move in the space.
“The curious thing about [Razer Gold] is we’ve actually kept it on a closed loop,” Tan said. “We could literally open it up on a blockchain tomorrow [and] it could literally be one of the biggest virtual currencies in the world.”
“I think it is definitely one of the areas we see a huge amount of potential,” he added. “But we are really taking our time to really understand the different cryptocurrencies out there, the blockchain technologies out there, before we do make a move.”
Razer was founded by Tan, a Singaporean entrepreneur and former lawyer, in California back in 2005. The business is now worth over $2 billion on the Hong Kong market. Razer’s share price is down about 27% year-to-date, although it’s up over 13% in the past year.

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Check out the companies making headlines before the bell:
Coty (COTY) – The cosmetics maker’s shares added 2.7% in the premarket after it said it expects a return to annual sales growth this year. Coty’s adjusted loss for its latest quarter was 9 cents per share, 3 cents wider than expected, but sales did come in above Wall Street forecasts.

Dollar General (DG) – The discount retailer beat estimates by 10 cents with adjusted quarterly earnings of $2.69 per share and revenue slightly above forecasts. Comparable store sales fell 4.7%, less than the 5.1% drop expected by analysts surveyed by StreetAccount. However, Dollar General did forecast lower-than-expected earnings for the full year, and its shares fell 2.9% in premarket trading.
Dollar Tree (DLTR) – Dollar Tree shares fell 3.1% in premarket trading after the discount retailer posted a mixed quarter. Revenue fell below Street forecasts, while earnings of $1.23 per share did beat the consensus estimate of $1.00.
J.M. Smucker (SJM) – The food producer earned an adjusted $1.90 per share for its latest quarter, 4 cents above estimates, with revenue slightly above Wall Street projections. However, Smucker cut its full-year forecast, noting higher input costs and supply chain disruption. Shares lost 1.9% in the premarket.
Abercrombie & Fitch (ANF) – The apparel retailer’s shares slid 7% in the premarket, as revenue fell below analyst forecasts. Abercrombie did report an adjusted profit of $1.70 per share, compared with a 77-cent consensus estimate.
Salesforce.com (CRM) – Salesforce earned an adjusted $1.48 per share for the second quarter, beating the 92 cents consensus estimate, with revenue also topping Wall Street forecasts. Salesforce also issued an upbeat outlook as companies continue to shift applications to the cloud. Shares rose 2.9% in premarket trading.

Ulta Beauty (ULTA) – Ulta shares rallied 6.4% in the premarket after it more than doubled the $2.59 consensus estimate with a quarterly profit of $4.56 per share. The cosmetics retailer’s revenue beat estimates as well, and it raised its full-year outlook as an overall improvement in the beauty industry continues.
Williams-Sonoma (WSM) – Williams-Sonoma surged 15.2% in premarket trading following top and bottom-line beats as well as a raised outlook and a 20% dividend increase. The housewares retailer reported an adjusted quarterly profit of $3.24 per share compared with the $2.61 consensus estimate, as the pandemic-induced focus on homes and home decor continued.
Box (BOX) – Box beat estimates by 2 cents with an adjusted quarterly profit of 21 cents per share, while the cloud storage company’s revenue also came in above analyst forecasts. Box also raised its full-year revenue guidance, saying it continues to benefit from the “megatrend” of digital transformation. However, shares fell 1.7% in premarket action
Snowflake (SNOW) – Snowflake lost an adjusted 4 cents per share for its latest quarter, narrower than the 15-cent loss anticipated by Wall Street, while the database software company’s revenue came in above consensus. Sales more than doubled from a year ago, but its overall loss widened compared with a year earlier. Snowflake jumped 5.2% in premarket trading.
Pure Storage (PSTG) – Pure Storage soared 14.1% in the premarket after it nearly tripled the 5-cent consensus estimate with adjusted quarterly earnings of 14 cents per share. The cloud storage company’s revenue also topped Street projections as subscription revenue rose 31% from a year ago.
Autodesk (ADSK) – Autodesk shares tumbled 7.7% in premarket trading, as quarterly revenue was merely in line with estimates and its current-quarter earnings guidance disappointed investors. Autodesk did beat estimates by 8 cents for its latest quarter with adjusted quarterly earnings of $1.21 per share.
Western Digital (WDC) – Western Digital is in talks for a possible $20 billion merger with Japanese chipmaker Kioxia, according to multiple reports. Talks are said to have heated up in recent weeks, and a deal could be reached as early as mid-September, according to people familiar with the matter. Western Digital rose 1% in the premarket.

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