Singapore Budget Trade Ideas : Any Surplus Is Immoral

sg budget t shirt

Looks like I pre-empted the Budget – T-shirt I bought from Uniqlo for Chinese New Year (which is now selling at a discounted 9.90! ) that is lifted off Jenny Holzer’s text installations at the MoMa some years back.

And I am not writing about the Budget today because there really is NOTHING TO SAY .. BUT ONLY GOOD THINGS for the $1.90 that I spent on the newspapers (ST 90 cts, BT 1 dollar) and everyone is clamouring to sing praises of it (as if it is going to help their kids get into an elite school ?).


1. Budget is out of our control so criticising or praising will not help
2. Budget is long term so only the wise and intelligent can see the big picture
3. It won’t make you rich but it will help us get by (actually, it could make you rich but I am not telling)
4. It will slow down the rate of our favourite old time restaurants closing down because of REIT rental dominance and labour shortage – Long live the foodie culture of Singapore because A Happy Man Is A Well Fed Man
5. You cannot complain about the petrol rates because you get a discount on road tax
6. They forgot the alcohol and cigarettes this time ! (Hooray !)

So let’s get to work and derive some nice trade ideas from this, shall we ?

Headline – Deficit S$6.2 bio ! (MOSTLY FROM CHANGI AIRPORT)

Deficits are usually blamed for higher interest rates because of government borrowing but our government is already borrowing more than that from their annual SGS auctions with 2014 seeing a record S$18.8 bio raised from bonds and we have S$ 90.2 bio of government bonds outstanding that we can assume is just sitting around because Singapore usually runs a budget surplus.

Our big picture expectations should remain unchanged from last year and this is what I said then.

If we stare at this long and hard like I did last month, I still think the country is going back to school and patching up the little cracks in the battlements. The emphasis on rampant and prolific growth has waned as social welfare, home affordability and support for small businesses take over.

Headlines these days are less aggressive, lacking the competitive propaganda of the past for Singapore to excel and make their global footprint. And I am not sure if I am the only one who noticed that there is no mention of any population stats so far this year.

Singapore has been going back to school since 2014.

And they are learning many lessons from the political upheavals from around the world where populism is taking root, all the way from Indonesia to India, China to Greece – that’s why the higher income tax bit !

Distilling the essence of the government mindset will explain why USDSGD and SIBOR and SOR is going up.

Quotes from 2014

The whole idea of the Singapore economy is to value add and we are running out of space. With Raffles Place valued at $3k psf, we cannot really push our luck too much further.
The people must continue to KEEP CALM, INNOVATE, CREATE VALUE and CARRY ON, besides hoping that the rest of the world will not catch up so that this little former fishing port can remain a safe haven oasis in the storm and a grand dream destination for the best and richest in the world.
Giving up is not an option because we really have nothing of value to sell except for our services ….”

From there, we can see where MAS is coming from as well and my take last year was that ” And it is nice to be read sensible analyses from a central bank that is not encouraging every single investor to go out there and borrow themselves to death.
Thus for lucky Singaporeans, it will be harder to get rich but also harder to get poor.”

I read an interesting piece by Ricardo Hausmann last night and his take on inequality whereby he proposes INCLUSION instead of REDISTRIBUTION of wealth.

And he mentioned Singapore !

“One reason why Singapore has a well-funded government, despite low taxes, is that its successful policies caused the land and real estate it owned to explode in value, generating a huge revenue stream.”

My Expectations

1. Do not expect those casino years GDP growth
2. Do not expect any inflation targeting here
3. Expect soft landing to property market
4. Expect employment to remain steady

I would expect MAS to fine  tune the policy without disruption which means I still think there is a chance of a once off re-centreing in April that will bring SIBOR down because we really cannot be the only AAA country in the world where interest rates are spiraling up when inflation expectations are collapsing.

** Note : Bank of Israel (A1/A+)  just cut their rates to 0.1% yesterday.

We should expect to see Temasek do some fund raising this year now that they are included in the Net Investment Returns Contribution of the country.

It is quite surprising because I never really paid that much attention to it but WE ARE LUCKY ! Does anyone realise that GIC and MAS have been the 3rd biggest revenue generator for the government ?

Source : Business Times

Source : Business Times

It is almost like having Goldman Sachs work for you ! (not sure about what bonuses they are paid though).

GLCs and the rest of the SGX will also lead by example and we should see more higher quality bond issuances as they GO FORTH AND MULTIPLY (BT headlines).

More tech IPOs should be coming … less commodity and shipping stuff.

As for distressed companies, I do not see a lot of sympathy coming forth. No signs are government aid for companies affected by the commodity bubble bursting….

I see the interest rate curve re-steepening because of the long-term growth horizon the country is taking.

Thus I will keep the long USDSGD to early April (at most), sell the STI and move to European shares, no thank you to real estate for the time being (including REITS), sell SGD corporate bonds and wait for new stuff, find a way to privately invest in local healthcare, education and perhaps, invest in a start up technology company and GET SOME GOVERNMENT FUNDING FOR THIS WEBSITE ??? (any advice will be appreciated)

But the first thing I am doing is to buy a few more of those t-shirts ! Because I paid full price for it last month.