Category: retire]SG

SGX n Sgp_fin_sector

Posted on by tiger40490

k_hongkong

When people compare two financial centers, they would compare the two currencies (and capital control);;; the two AUMs [1];;;; the two financial sectors’ workforces;;;; the two work visa policies;;; the two regulators (and stable, progressive legal frameworks);;;; the two tax regimes [for institutions, investors and employees];;;;; the two English proficiency standards;;;; and the two cities’ financial (beyond stock-) exchanges. By these standards, Shanghai is lagging behind as a _global_ financial center. In Singapore’s case, Sg stock exchange has been losing market share, losing “customers” [IPO companies, retail investors,,,], but things are not as disastrous as perceived —

  • SGX is more than the (sleepy) stock exchange… SGX is profitable mostly from derivative business including commodities.
  • Singapore is doing fine as a financial hub, esp. a PWM center, albeit with a sleepy local stock market.
  • Switzerland is a PMW financial center, without big financial exchanges. I think Singapore has chosen a similar direction.
  • Therefore, the persistent criticism on SGX relative to HKEX is being challenged and rebuffed in the Bloomberg article below.

As to the eq business, SGX is playing the hedgehog, presumably resigned to a shrinking market share, and tightened “quality control”, in a bid to strengthen its reputation as home to conservative, traditional, proven (some say Sunset industry), safer stocks. Such stocks are “suitable” for local investors + some private banking clients. I guess many institutional investors globally like the defensive dividend stocks on SGX.

I think a nearby regional bourse may boast far more listings (than the Sgp bourse), but often mixed quality, including many small, less proven stocks that may not qualify for the major exchanges. Analog — my dad authored many quality academic books, but far less than other authors of low-quality books.

[1] aggregate AUM across all financial companies of a city is an indicator of aggregate profit, tax revenue, and fund mgmt job market. More broadly, AUM (smart_money) is also an indicator of the financial stability of the country. Temasek^MAS_OFR^GIC shows about SGD 5T AUM. Note Smart_money is different from hot_money. Smart_money is legally free to leave but there are financial consequences so most investors “stay here” long term.

—  based on a 2019 Bloomberg article (https://www.bloomberg.com/news/features/2019-02-11/the-incredible-shrinking-singapore-stock-market)

As of 2021, Singapore was ranked #2 most competitive (not largest) wealth management center — ahead of Hong Kong and second only to Switzerland globally.

One reason why total listing is lower on SGX than other exchanges? SGX doesn’t “refrain from delisting zombie companies just to keep its numbers up”. A smaller pool of companies limits the choices investors have, even as the fund management industry continues to grow. A lot of private bank money is now in Singapore, and they actually like the core, somewhat boring, defensive stocks.

SGX main board’s backbone consists of safe, steady stocks favored not for their growth prospects but for their dividends.

Q: Are SGX stocks showing better total return than other regions, measured in SGD?
A: yes, better than all regions (except U.S.), mostly due to dividend
A: measured in USD, I think picture would be even stronger

Having a sleepy stock market (SGX) does little to burnish Singapore’s reputation as a financial hub, according to one practitioner.

A Maybank economist and a SGX officer both cite SGX’s strengths as:

  • an established REIT market;
  • notably high valuations for medical-services companies;
  • a good track record in listing consumer stocks
  • about half of the companies listed on SGX are foreign
  • institutional money trusts the Singapore market

y SG rated most expensive city

Posted on by tiger40490

I don’t want to spend too much time on questions that only bother other people, like this question:

Q: why is Singapore rated as one of the world’s most expensive cities?

In this case,  I decide to spend a few minutes, because my family members may ask this question, or they may face this question from their friends.

— First, these rankings are often politically motivated, perhaps to weaken the competition like a smear campaign.

— Next, to understand the ranking, we need to zoom into the basket of goods used to compared expensive cities. The score is a weighted sum over this basket.

According to various sources, the biggest reason for SG’s bad score is cost of car ownership (not taxi not public transport). Weightage of this item in the basket can be adjusted/manipulated.

— Note the basket is often constructed for a foreigner, perhaps a foreign executive, not an average local resident.

Local residents enjoy subsidies in education, healthcare, utilities, public transport,,, How about the elephant in the room — Housing?

Public Housing for SG citizens is subsidized in the demand-controlled HDB housing market. If (without demand control) a rich foreigner were allowed to buy HDB in bulk, then price could double or triple to the level of private properties.

Therefore, Citizens face a lower home price than foreigners. How about renters — do foreign renters endure higher cost? I would say arguably yes. My foreigner colleagues (Indians, Chinese, Koreans, not to mention Caucasians) mostly rent in condos. As a local, I’m more likely to rent in HDB.

## some advantages of SG citizenship over SPR

Posted on by tiger40490

This is written for some friends asking me

Q: as a Singapore PR, why should I bother to apply for citizenship?

  • Primary school registration favors citizens
  • university subsidies .. for citizen students. Admission criteria? Not sure
  • scholarships .. usually target citizens
  • bursaries … mostly target low-income citizens
  • LTVP .. sponsorship of your family members if you are citizen.
  • free or subsidized job training .. for mature job seekers
  • some job positions favor citizens
  • GST voucher?
  • one-off relief during economic crisis
  • hdb home upgrade .. citizens pay (almost) nothing
  • [r] reduced fare on public transport
  • [r] recurring rebates .. monthly utility, town council fees..
  • [r] medisheild subsidy .. is more generous for citizens
  • [r] government hospital subsidies
  • [r] polyclinic subsidies
  • [r=impacts retirement planning for wife and me]

— school fee subsidy.. including preschools

  • Primary school: PR pays about $200/M vs $0 for citizens
  • Secondary school: PR pays $400+/M, vs $25 for citizens
  • JC: PR pays $460/M vs $72 for citizens

Sgp reliance@foreign worker: maintain cost+competitive

Posted on by tiger40490

— SG competing for foreign talents .. SG has limited natural resources, similar to Japan.. must maximize and compete on human capital, but the local population human capital is also limited. For example, FinDev is one HVA [high value-add] sector. Most of the qualified individuals are foreigners including Indians, Chinese, East Europeans, SEAsians. Citizens like me are perhaps 3~7% of the talent pool. The HVA sectors often need skills that are lacking in the local population. Therefore, SG needs to /import/ foreign talents to jump start those growth engines, and hope to get more locals trained in those HVA sectors. Many of my Fin-IT foreign colleagues really like SG and want to stay here forever. If one of the foreign talents have kids growing up in SG, government hopes these kids mingle with local kids and become naturalized Singaporeans. However, these same individuals often migrate to U.S., Australia, Canada, or return to home countries. Therefore, SG is engaged in a global competition for talents and their _genes_. I am probably considered one of the well-naturalized foreign talents.

How about HK in comparison? HK has plenty of talent from mainland, but also needs foreign talent (Caucasians, Indians…) in key sectors.

— stats .. In the media, “ForeignWorker” usually refers to WP [very low min salary] and sometimes includes S-Pass holders [must earn at least S$3k as for 2023 new applicants]. In contrast, ForeignProfessionals or ForeignTalents usually refer to S-Pass or EP holders.

As of mid 2021

  • number of WP holders fell by 16%, from 1,000,000- in December 2019 to 834,000 in June 2021.
  • .. 256,000 domestic workers as of mid 2019
  • number of S-Pass holders fell by 18%+ from 200,000+ in December 2019 to 164,200 in June 2021.
  • number of EP holders fell nearly 14%   from 193,700 in December 2019 to 167,000- in June 2021.

As of 2022, Sgp had a workforce of 3.63 million.

https://www.channelnewsasia.com/news/singapore/singapore-foreign-workers-reliance-challenges-12806970?cid=h3_referral_inarticlelinks_24082018_cna is a mid 2020 analysis. It shows that Singapore’s 1.4+ million foreign workforce is 25% of the country’s population of 5.7 million people (2020 stats).

Aside from the 400,000 (2021 was lower) foreign professionals holding either an Employment Pass or S-Pass, nearly all the rest are work permit holders in low-wage, low-skilled positions… a million+ (2021 was lower). Part of that was 300k+ migrant workers. The proportion of the foreign workforce relative to total employment varies from about 78 per cent in construction to about 56 per cent in manufacturing, and around 30 per cent in services.

In 2020, Transport minister Ong Ye Kung said in Parliament that in the financial sector the median wage for Singaporeans was S$6,000 to S$8,000 a month, compared with S$8,000 to S$10,000 for permanent residents and foreigners.

A 2022 article claims that non-residents comprise 27% of a population of 5.5 million (2022 stats), and as of 2020 foreigners made up more than 20% of the professional labor force [EP or S-Pass PMET, not PRs].

— Q: J4 this blogpost, i.e. why do I bother?
A: nursing (and maid) cost affects my family’s healthcare budget now till our golden years. Consider my elderly care and Shield plans. I can see these costs are higher in other developed countries.
A: .. to a lesser extent, ditto for other public (and private) service infrastructure. I am relying on the Singapore infrastructure
A: SG’s long-term competitiveness depends on foreign manpower both at high end (not the focus here) and low end

Implicitly, we are referring to a few categories of low-wage foreign workers

  • healthcare including nursing
  • construction, manufacturing,
  • maid
  • logistics
  • customer service including retail, call centers
  • consumer-facing service sectors

— migrant worker salary and local enthusiasm for those jobs
Bringing in foreign workers is not as cheap as people think. A construction worker typically earns about S$800 a month in basic pay, but each worker costs at least double that, if you count the levy, accommodation and food expenses, as well as overtime pay. “It’s not that much more expensive to hire a local,” Mr Peh said. He is willing to pay between S$2,000 to S$3,000 for a local, but there are still no takers when he puts out the job advertisements.

At a level above construction site work, the enthusiasm among Singaporeans to take up jobs for technicians and technologists is low due to perceptions of these jobs being meant for foreign workers and the lack of recognition and career progression.

At precision engineering manufacturer Rexadvance Technologies, nearly all its machine operators are S-Pass or Work Permit holders. Workers in these roles are paid S$2,500 to S$3,000, but the amount is still not enough to attract local applicants.

— strategic dependency on migrant workers (not EPs)
During a May 2020 discussion, trade bodies and associations released a joint statement declaring that Singapore’s economy will suffer without foreign workers, and result in fewer jobs for Singaporeans in the long run.

Several Government ministers, from Minister for Trade and Industry Chan Chun Sing to Deputy Prime Minister Heng Swee Keat, have reiterated during recent media interviews that while Singapore should depend less on foreign workers by automating processes, the country can never eliminate its need for them.

Singapore’s small and shrinking domestic population means it is increasingly tougher to find the people who will take up low-wage, manual labor jobs.

Mr Chan pointed out “For a small country without natural resources, we compete on the basis that we are a good place for people to do business. If we lose out in that relative game compared to other people, then, unfortunately, I think the future of Singapore will not be what we expect it to be”. Singapore’s competitiveness depends on low-wage foreign workers.

helping hand for the poor in bad times: SG approach

Posted on by tiger40490

The “PAP approach” is an instructive reference when I need to decide how to help my grown-up children if and when they fall on hard times.

— https://www.channelnewsasia.com/news/commentary/cash-assistance-for-low-income-families-in-singapore-12651816

SG gov prefers to help the low-income family with

  • utility rebate, grocery vouchers, school fee subsidies — otherwise a “naive”, blind cash handout could go to taxi fares, addictions (gambling, alcohol, smoking), paying off debt (and more debts)
  • cash handout as additional x% of their wage — to encourage them to go out and work

PAP’s tilt towards the vulnerable #per-capita

Posted on by tiger40490

In https://www.channelnewsasia.com/news/singapore/ge2020-lawrence-wong-pap-to-do-more-win-young-middle-aged-voters-12943628?cid=h3_referral_inarticlelinks_24082018_cna, Lawrence Wong said

“We also need to ask ourselves, why did the PAP manage to retain 61 per cent? In fact, the PAP has never gone below 60 per cent all these years, and that’s because the base kept faith with the PAP knowing that the PAP kept faith with this base,”

“What is this base? They are the working class, the middle class, the heartland of Singapore and the PAP must continue to keep faith with our base.”

He added: “Our policies must always tilt in favor of the less fortunate and vulnerable. This is in the PAP’s roots and DNA. We must never waver in our commitment to social justice, to preserve social mobility for all Singaporeans and to build a more fair and just society.”

During covid19 pandemic, the migrant workers’ living condition was highlighted as evidence of inequality in Singapore. However, the PAP government takes care care the poor iFF they are citizens.

— My take: I am the middle class !

  • Until I returned from U.S. in 2012, I identified myself 100% with the working class of Singapore.
  • I think after I finishing paying my mortgage and MSFM, my BRBR started feeling like middle class.
  • After my overseas properties started producing, I felt more like middle class.
  • as of 2020, I feel my income is middle class in terms of per-household percentile. But by per-capita percentile, my family may not qualify to be middle class.

After or even before retirement I may slide from cashflow high-ground into cashflow low-ground. I would be more vulnerable and would appreciate the PAP’s tilt.

— tilt but low tax on the rich?

In the west, high personal income tax is supposed to reduce income inequality but I am disillusioned completely. The rich tends to have resources to help them avoid high tax. U.S. and China both have higher income taxes but the poor are better taken care of in Singapore.

 

public debt: SG^US

Posted on by tiger40490

See also

“Private” debt refers to borrowing by companies + consumers, whereas “Public” debt refers to borrowing by central government.

Q: Why do citizens worry about government debt?
A: I think a government in deep debt would charge more taxes (individual, corporate, or GST) and reduce spending on infrastructure investments, and public services (like public health, public education)
A: the U.S. discussions actually center on debt burden -> default risk -> treasury yield.

— https://www.mof.gov.sg/Newsroom/Media-Articles/askST-Why-does-Singapore-have-an-external-debt-of-US1-766-trillion- explains

This borrower (i.e. PAP government) borrows only to invest. Not allowed to SPEND the borrowed fund or use in the budget.

The income which this borrower earns from its investments is also more than sufficient to cover the debt servicing costs. In contrast, U.S. federal government allocates a portion of the budget on debt servicing.

Taking into account our assets, the PAP government have no net debt. This is similar to my balance sheet in 2013 — my 400k debt was much smaller than my assets including the #1173 flat.

In contrast, Japan, US, German,, central governments have non-zero net debt. I think the U.S. federal government owns rather low asset per capita (than PAP government). The wealth is in the private families or corporations.  I think the fed gov asset is less than its liabilities.

— https://www.investopedia.com/articles/economics/10/national-debt.asp -and- https://www.investopedia.com/updates/usa-national-debt/ explain

Each year, the fed budget deficit is covered/bridged by new debts. Consequently, U.S. (federal) debt is simply the net accumulation of the federal government’s annual budget deficits. (On the opposite, SG past reserve is the accumulation of past budget surplus, whenever there is.)

When fed gov debt exceeds the Debt Ceiling (22T), and Congress doesn’t approve an increase, the government shuts down to avoid default.

U.S. fed budget allocates around 8% to debt servicing [1]. However, the biggest allocations are medicare and social security. Tax income is not enough to fund these allocations, so the fed government has to issue new debt to “borrow from future generations”. In general, When gov debt is used to fund economic expansion (investment), current and future generations stand to reap the rewards. However, debt used to fuel consumption only presents advantages to the current generation, similar to aged parents taking a loan under the name of their sons/daughters.

[1] In contrast, SG gov receives SGD 17 billion (more than 20% of the budget) from past reserve investment income. This contribution is more than personal income tax income — see SG rainy day reserve^other nations’

“move”rEstate portfolio to SG] %%twilight years

Posted on by tiger40490

I have always agreed to the prudent advice that as we age, our risk appetite drops and we should rationalize/adjust our rEstate portfolio to less risky countries. Every country has risk factors, but SG remains the least risky.

— geo-concentration risk .. minor concern as SG is my home country.
Q: if I were to invest 300-600k in a SgCP, which existing property would I sell to create a higher allocation to stocks like 200k? Net effect is worse concentration to rEstate, worse geo-concentration to SG, but it is probably prudent, esp. in my retirement.
A: perhaps BGC

I am already more geo-diversified than most peers. See %%riskTolerance: which countries feel OK

 

how is CPF int guaranteed while GIC return=uncertain

Posted on by tiger40490

I’m 99% confident that the actual interest accrual on my CPF money is either 2.5% or 4%, except the additiona 1% on the first $x portion. The return is predictible and guaranteed, without any time-variable element as in commercial annuity/endowment policies.

If we have doubts over banks and insurers long term rate of return and their guaranteed interest payout, then why is the CPF interest rate so much more /dependable/ and beyond-doubt?

— “backed by the government”
U.S. treasuries are backed by the full faith of the federal government, which can borrow from international investors (via new bond issues) to meet existing obligations. SG is different.

Your and my CPF money is actually invested (GIC as AMgr) in risky long-term assets. The capital and interest guarantee is backed by SG government, not due to bond issuance (a form of money-printing) but due to superior long-term investment returns achieved by GIC. About 6%+ annualized … see other blogposts.

If long-term return is below 4% but SG government relies on bond issuance, then we are borrowing from the future, and the system becomes unsustainable.

As an interesting comparison, U.S. municipal bonds are backed by local governments, which can and did default. Therefore, these issuers lack the credit rating of national governments.

Q: in a multi-year down turn, how confidently can the CPFB (cpf board) meet its obligation to its members? Answer below is based on MOF | Is our CPF money safe? Can the Government pay all its debt obligations? esp. Q28.

A: SG Government bears the risk of GIC’s investment returns over any particular period falling below the interest rates GIC is committed to pay on SSGS. Investment returns can fluctuate widely, depending on global market cycles and shocks. This is, for example, what happened during the Global Financial Crisis (GFC) and its aftermath. The GIC experienced losses in investment value during the GFC, and low average returns for five years, before recovering (see GIC’s annual report).

— Q: Why can’t the CPFB leave the cpf members’ aggregate balance in some passive account and pay out the annual interest amount?
That way, the CPFB would run a deficit every year. The interest paid to members must come from some productive asset, which must have income to sustain the payout. This is the sustainability argument.

The optimization argument .. The cpf balance is not going to be withdrawn any time soon, so it should be deployed for long-term growth assets, rather than sitting idle.

— in 2024, there was rumor that goverment has difficulty generating 4 ppa return on a huge balance of CPF SA/RA/MA, so they will close the cpfSA after you turn 55.

SG rainy day reserve^other nations’

Posted on by tiger40490

Who owns the $700b (or whatever)? Who benefit from it? I would say Citizens benefit more than non-citizens.

https://www.todayonline.com/singapore/explainer-how-much-surplus-govt-has-accrued-under-current-term-and-what-happens-it describes how each term of the PAP government (each administration) contributes or draws upon the past reserves.

— https://www.straitstimes.com/politics/size-of-reserves-cannot-be-disclosed-as-a-matter-of-national-security-says-heng-swee-keat says the past reserve is at least S$700b, invested by three sovereign funds.

HKMA official website declares about USD 540b of reserves.

— based on https://www.channelnewsasia.com/news/singapore/if-situation-deteriorates-significantly-due-to-covid-19-dpm-heng-12480226

He said for the financial year 2019, the Net Investment Returns Contribution (NIRC) was the largest single contributor to the Budget, representing 3.3 per cent of gross domestic product (GDP).

This is a “highly unusual and very fortunate position”, said Mr Heng, who noted that this was not the case in most advanced countries that pay about 2 per cent of their GDP in debt-servicing of accumulated debt.

On the other hand in Singapore, the reserves have generated substantial returns, which help to keep taxes low. “Today, the NIRC at S$17 billion is more than personal income tax collections at S$12 billion, and GST collections at S$11 billion. If we did not have the NIRC, even doubling personal income tax, or doubling the GST rate to 14 per cent, would still not be enough,” said Mr Heng.

“Tell me in which other country are citizens able to reap the benefits of past savings in this way?” he added.

“So let us never forget that what we have inherited is very unusual and very precious. Let us be responsible and steward these properly for our future generations.”

The reserves have also given Singapore, a small country with no natural resources, the confidence to deal with the ups and downs in the world, said Mr Heng. In 2009, then-President Nathan approved a draw of S$4.9 billion from the past reserves to fund the Resilience Package. A year later after the economy rebounded sharply, the Government decided to return the money used to the past reserves. “It did not have to, but did so, to maintain the discipline that has allowed this unusual move in the first place,” said Mr Heng.