As the fireworks light up the night sky marking this last day of the year (yet another event celebration with large-scale fireworks; surely we must be suffering some fireworks-display-fatigue by now…), and champagne flows freely in parties big and small across the island, the feel-good factor seems to be all around and the common toast being made appears to be:
Congratulations, what a good year it’s been!
While it does seem that Singaporeans are bubbling over with optimism, I wonder if the pervasive feel-good ‘wealth effect’ is truly backed up by the numbers? Some counting may be in order…
To me, trying to produce a measure like Bhutan’s GNH or Gross National Happiness is beyond my comprehension, even if David Cameron has already boldly gone ahead and endorsed a ‘Happiness Index’ for Britain. As some put it, this “pursuit of statistical happiness” may just end up being a futile exercise in fitting data to favourable parameters.
[And in a not-so-ironic twist, when a foreign researcher and writer Dan Buettner drawing from secondary research concluded that Spore is one of the happiest places in the world and the happiest in Asia, the quintessentially Singaporean trait to deny themselves happiness and indulge in “everything also must complain lah” came to the fore, and brickbats at Mr. Buettner were duly flung.
So, let’s leave the more esoteric metrics aside and count the numbers that can be counted.
Singapore facts and figures, 2010:
GDP growth: a searing +14.7%
STI Index (the local stock market index): +10.1%
Inflation rate: estimated to come in between 2.5-3.3%
Average wage increase: +3.1%
Unemployment rate: 2.2%
By any measure, these are fantastic numbers.
Optimism and wealth effect justified? Truly a good year then?
Maybe not. Good or bad is always really only relative anyway. It’s how we do against the Joneses (or in this case, the Tans, Alis or Kumars) which really matter.
And looking at the numbers, with average wage increases only just offsetting the high end of inflation estimates, the large majority of Singaporean workers are simply just treading water, with no real increase in nett income.
It is only the top 10 or 15% of high-income earners who has seen wage increases matching or exceeding the +15% in GDP growth (as always). The past year, alas, for the typical worker, has really only benefited him with better job security in the environment of a tightening labour market.
Perhaps its the wealth effect then. The true measure of A Good Year must surely lie in a person’s expanding net worth.
But the average Sporean, with his high savings rate (in cash, cash deposits) is never fully invested in the stock markets, even taking into account his national pension investment funds. And with his stock portfolio in all likelihood highly-diversified into the more anemic markets this year, it is unlikely that the average Sporean’s overall stock porfolio is reporting little more than a squared result this year.
The good cheer may lie within the other single largest asset Mr Singaporean may ever own (or at least partially own, as he pay down his home mortgage) in his life — his residential property. With Spore being the country with the highest home ownership rates in the world at 88.8% (nice number eh), any significant changes in home prices shall be the prime mover of Wealth Effect across the nation.
And indeed, property prices have risen at a nice clip this year, continuing with the even faster increases of the last 3 quarters of 2009, rallying from the crisis low of 1Q2009, to reach new all-time highs:
[Chart shows price increases of 15% for 2010, and about 35% for the whole period from the 1Q2009 low]
[The chart above shows only the price index for Private Property, which reflects less than 20% of the population. The vast majority of the population live in public housing, but even there the price increases are laudable, with 6 straight quarters of period-on-period cumulative growth of ~20%]
So apparently, the average Singaporean, with an appreciating residential home asset and a relatively more secure job, has been more than happy to take his cues from the high-income earners and business owners, and loosen his purse-strings and goes ahead to spend and participate in the brimming wealth effect… Or at least to toast one another about the good year past…
Enjoy it while it lasts…
The real and largest beneficiaries of this economic upswing are of course the brave, risk-taking, profit-driven business-owners. And rightly so.
Here is a recent piece of news that by all counts should bolster confidence in trade and business activity growth:
Bank lending in November up 14.5% on-year
-Banks gave out 11.4% more loans to businesses on-year in November
If the increase in business lending is really for the purpose of meeting increasing business activity, well and good.
But when I hear stories of the largest and most completely vertically-integrated agriculture commodity company announce plans to acquire developmental land for real-estate development in China, I can’t help but wonder:
Besides the obvious charges of overreach and lack of focus, I wonder if that may mean the more than six-fold increase in share price in four years is getting too rich, and together with possibly a forecasted lack of further growth in its dominant market, management is casting about to deploy cash and grabbing for equity returns wherever they can to justify value…
[But the real fear is really of Asian Godfather-type shenanigans in the link-up with the ‘sister’ cross-linked and non-listed(!) companies owned by the Sugar King patriarch…]
Is business activity and trade growth really as robust as it seem?