A Good Year ?


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?


5 thoughts on “A Good Year ?

  1. MTI (Ministry of Trade and Industry) tagged/spinned its latest press release on 4th Quarter 2010 economic activity as:

    Pace of Growth Improved in Fourth Quarter 2010

    which appears to back up the quoted news report in the post above.
    [But really, MTI?]

    But as per my slant in the post, I am more interested in the personal balance sheet of the individual Sporean, and how it may drive/inhibit his economic decision-making for the most important portion of his financial portfolio, his property assets.
    [Strictly for selfish vested interests of course, as in how it may affect the local property market]

    And this following letter written and sent in by a concerned individual, in his capacity as a credit counselling advocate, outlines perfectly the facts and figures in personal indebtedness in Singapore, and especially with major caveats towards property loans.
    This is exactly the kind of caution that needs to be sounded and discussion to be had, yet it seems to be ignored/played down by the relevant government authorities, the news agencies and (more predictably) the real estate research analysts.

    Jan 5, 2011

    Personal debt bomb

    THE real star behind the recent Monetary Authority of Singapore statistics is consumer loans and not business loans (‘Business loans surge in sign of upswing’; last Thursday).

    Business loans actually contracted from July 2009 until March last year, and showed anaemic growth until the second half of last year.

    By contrast, total consumer loans have never declined and have grown steadily with usually double-digit growth year on year. Even in the depths of the financial crisis, total consumer loans were growing at a high single-digit pace from October 2008 to September 2009, before spurting into double-digit territory a year ago.

    The growth of total consumer loans has quickened from 10 per cent a year ago to more than 18 per cent for the past three months to reach $150 billion. Business loans managed only a double-digit growth from October to November last year.

    The performance of business loans therefore pales in comparison with the growth of consumer loans.

    The fast growth can be explained by housing loans. January 2008 housing loan figures were already 16 per cent higher than the corresponding figure in 2007. This double-digit performance lasted until October 2008, when growth figures slipped into the high single-digit figures before going back into double-digit growth in July 2009. Total housing loans are now $111 billion.

    Since May last year, housing loans have been growing at more than 20 per cent year on year, a growth rate that must be the highest ever seen in Singapore.

    Two other milestones which merit mention are that the total number of main credit cards crossed six million in October last year; and second – which is of greater concern – that rollover balances breached the $4 billion mark in November. This is the amount that is not paid by cardholders and on which interest is charged at usually 24 per cent per annum. Rollover balances have been growing at an average annual rate of 11.5 per cent for the past two years.

    Personal indebtedness in Singapore is, therefore, growing unabated and the pace has quickened this year. The recent big surge in housing loans and the growth of rollover balances raise the question of whether Singaporeans, already facing one of the highest debt-to-income ratios in the world, have placed themselves in a very precarious situation.

    If the economy stumbles and real estate prices decline, many individuals will be unable to pay off their debts.

    Kuo How Nam
    Credit Counselling Singapore


    Kudos to Mr. Kuo.

    [So, housing loans are growing at >20%, far above even the once in a fifty-year GDP growth rate of 15%;
    and with official average real wage growth at effectively zero (compounded by loud coffee-shop whisperings that the REAL wage growth, after adjusting for foreign worker income distortions, is actually negative),
    it all makes for a potentially explosive mix of:
    “Double, double toil and trouble; Fire burn and cauldron bubble”.

  2. The Rise of the New Global Elite


    It’s true that few of today’s plutocrats were born into the sort of abject poverty that can close off opportunity altogether— a strong early education is pretty much a precondition—but the bulk of their wealth is generally the fruit of hustle and intelligence (with, presumably, some luck thrown in). They are not aristocrats, by and large, but rather economic meritocrats, preoccupied not merely with consuming wealth but with creating it.

    The Road to Davos

    To grasp the difference between today’s plutocrats and the hereditary elite, who (to use John Stuart Mill’s memorable phrase) “grow rich in their sleep,” one need merely glance at the events that now fill high-end social calendars. The debutante balls and hunts and regattas of yesteryear may not be quite obsolete, but they are headed in that direction. The real community life of the 21st-century plutocracy occurs on the international conference circuit.

    The best-known of these events is the World Economic Forum’s annual meeting in Davos, Switzerland, invitation to which marks an aspiring plutocrat’s arrival on the international scene. The Bilderberg Group, which meets annually at locations in Europe and North America, is more exclusive still—and more secretive—though it is more focused on geopolitics and less on global business and philanthropy. The Boao Forum for Asia, convened on China’s Hainan Island each spring, offers evidence of that nation’s growing economic importance and its understanding of the plutocratic culture. Bill Clinton is pushing hard to win his Clinton Global Initiative a regular place on the circuit. The TED conferences (the acronym stands for “Technology, Entertainment, Design”) are an important stop for the digerati; Herb Allen’s* Sun Valley gathering, for the media moguls; and the Aspen Institute’s Ideas Festival (co-sponsored by this magazine), for the more policy-minded.

    You might say that the American plutocracy is experiencing its John Galt moment. Libertarians (and run-of-the-mill high-school nerds) will recall that Galt is the plutocratic hero of Ayn Rand’s 1957 novel, Atlas Shrugged. Tired of being dragged down by the parasitic, envious, and less talented lower classes, Galt and his fellow capitalists revolted, retreating to “Galt’s Gulch,” a refuge in the Rocky Mountains. There, they passed their days in secluded natural splendor, while the rest of the world, bereft of their genius and hard work, collapsed. (G. K. Chesterton suggested a similar idea, though more gently, in his novel The Man Who Was Thursday: “The poor man really has a stake in the country. The rich man hasn’t; he can go away to New Guinea in a yacht.”)

    This plutocratic fantasy is, of course, just that: no matter how smart and innovative and industrious the super-elite may be, they can’t exist without the wider community. Even setting aside the financial bailouts recently supplied by the governments of the world, the rich need the rest of us as workers, clients, and consumers. Yet, as a metaphor, Galt’s Gulch has an ominous ring at a time when the business elite view themselves increasingly as a global community, distinguished by their unique talents and above such parochial concerns as national identity, or devoting “their” taxes to paying down “our” budget deficit. They may not be isolating themselves geographically, as Rand fantasized. But they appear to be isolating themselves ideologically, which in the end may be of greater consequence.

    The lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth. It is obvious which of these would be the better outcome for America, and the world. Let us hope the plutocrats aren’t already too isolated to recognize this. Because, in the end, there can never be a place like Galt’s Gulch.

  3. Not to value and employ men of superior ability is the way to keep the people from rivalry among themselves;
    not to prize articles which are difficult to procure is the way to keep them from becoming thieves;
    not to show them what is likely to excite their desires is the way to keep their minds from disorder.

    Therefore the sage, in the exercise of his government,
    empties their minds, fills their bellies, weakens their ambitions,
    and strengthens their bones.

    If people lack knowledge and desire
    Then they can not act;
    If no action is taken
    Harmony remains.


  4. “For fifteen years I have diligently studied earthly life. True, I saw neither the earth nor the people, but in your books I drank fragrant wine, sang songs, hunted deer and wild boar in the forests, loved women . . . And beautiful women, like clouds ethereal, created by the magic of your poets’ genius, visited me by night and whispered me wonderful tales, which made my head drunken. In your books I climbed the summits of Elbruz and Mont Blanc and saw from thence how the sun rose in the morning, and in the evening overflowed the sky, the ocean and the mountain ridges with a purple gold. I saw from thence how above me lightnings glimmered cleaving the clouds ; I saw green forests, fields, rivers, lakes, cities ; I heard syrens singing, and the playing of the pipes of Pan ; I touched the wings of beautiful devils who came flying to me to speak of God : . . In your books I cast myself into bottomless abysses, worked miracles, burned cities to the ground, preached new religions, conquered whole countries . . .

    “Your books have given me wisdom. All that the unresting thought of man has created in the ages is compressed into a small compass in my brain. I know that I am wiser than all of you.

    “And I despise your books, despise all worldy blessings and wisdom. Everything is void, frail, visionary and delusive like a mirage. Though you be proud and wise and beautiful, yet will death wipe you from the face of the earth like the mice underground ; and your posterity, your history, and the immortality of your men of genius will be as frozen slag, burnt down together with the terrestrial globe.

    “You are mad, and gone the wrong way. You take lie for truth and ugliness for beauty. You would marvel if by certain conditions there should suddenly grow on apple and orange trees, instead of fruit, frogs and lizards, and if roses should begin to breathe the odour of a sweating horse. So do I marvel at you, who have bartered heaven for earth. I do not want to understand you.

    –Anton Chekhov, The Bet.


    [NB: Not the best translation around. The Gutenberg’s version is better.]

  5. Prices of private residential properties increased by 2.7% in 4Q 2010:

    Prices of private residential, office, shop and industrial properties increased by 2.7%, 5.1%, 1.4% and 6.5% respectively in the 4th Quarter 2010.

    Rentals of private residential properties, office, shop and industrial properties increased by 2.6%, 4.7%, 1.7% and 5.0% respectively in the 4th Quarter 2010.

    The turnaround and rebound in the office and industrial properties market is now cemented.
    Father’s not going to be pleased…

    HDB resale market slows in 4Q 2010:

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