Thursday, January 7, 2016

Business leaders call for CPF monies to be invested in Singapore shares to help 'moribund' market

Jan 6, 2016

Marissa Lee

SINGAPORE - Major business chambers and trade associations are calling for workers' Central Provident Fund monies to be used to help revive Singapore's lagging stock market.

"Currently, our CPF money is pooled with our other reserves and managed by GIC. Unlike other jurisdictions where their pension funds have provided strong support for their stock market, Singapore rides against the wave by specifically stating as a policy that the funds managed by GIC are to be invested abroad," wrote the Singapore Business Federation (SBF) in a new economic position paper released on Wednesday (Jan 6).

Describing the local share market as "moribund", SBF said that the Government "should consider separating the CPF component and managing it differently as how pension funds are managed. This will free these funds from the GIC investment restrictions and will likely result in some investments in the Singapore market. These investments will send strong signals on our market to other investment professionals".

CPF members currently receive a fixed interest rate on their CPF funds.

The interest is paid out from Special Singapore Government Securities (SSGS) that are issued and guaranteed by the government which CPF board has invested in with the CPF monies.

GIC manages the CPF proceeds as well as other government assets.

[So, is CPF money for the SG govt to prop up the "moribund" stock market or to ensure that citizens have adequate retirement funds? The CPF primary objective has already been diffused and diluted by the various schemes - home ownership, investment, education, healthcare - and now the SBF wants the govt to use the money to prop up the local stock market? And what if the moribund stock market fails to yield the returns necessary to support the CPF interest rates? ]

This was just one of many bold recommendations floated in the 36-page economic strategy proposal, which the SBF will present to Mr Heng Swee Keat, Finance Minister and chairman of the Committee on the Future Economy at a conference, next Tuesday (Jan 12). 

[Sure. If by "bold" you mean "unabashed attempt to get a govt handout". Or "shameless appeal to nationalism for profit". If the govt were to suddenly inject about $200b (of CPF money) into the SGX, you can be sure prices will go up. It's the same when a whole bunch of rich people suddenly want to buy flats, or cars. Demand will cause prices to go up. In the case of stock prices, not because the fundamentals are sound or that the returns will be good. But simply because someone had the "bold" idea to force the SG govt to prop up the local stock market using CPF money. 

Is this a bad idea? No. It is a FUCKING BAD idea.]

Among others, the paper also calls for the Government to review its foreign manpower policies.

It also asked the Government to explore the possibility of creating a new market that can exist between the mainboard and the Catalist junior board for the growing number of "middle class" companies with stable earnings.

The report is backed by 28 trade associations and chambers and some 70 top-level executives, including Singapore Press Holdings chief executive Alan Chan.

"There is no better time than now to take bold and decisive moves that will strengthen Singapore's position," said SBF chairman S.S. Teo.

"The newly elected Government has a fresh and strong mandate."

Mr Teo also noted that some of the ideas proposed could appear "radical" and require "substantial changes" to existing policies.

"But we have to act decisively or risk greater failure in the years ahead", he said.

[Or risk decisive failure today. Why fail tomorrow when you can implode spectacularly today?]

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