Why Singapore's domestic woes are overhyped

Larger firms are coping.

According to CIMB, domestic woes in Singapore are overhyped. Population growth in Singapore is slowing as the country weans itself off foreign labour.

Housing vacancy will rise and rents, soften − bad for developers. Still, implications from the labour restructuring have been overblown.

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Some smaller companies may have closed but the larger ones are coping. Banks’ asset quality remains pristine.

Singapore companies have been expanding out of their small market for years, so their share-price driver should now be execution in overseas markets.

The concern for Singapore was never its government debt levels or corporate gearing. We also previously refuted concerns about rising household debt in Singapore, noting the relationship between income levels, wealth, debt and savings.

When one earns more, one will also save more, spend more and take on bigger debt to fund more luxurious consumption. Our studies show that Singapore’s household-debt-to-GDP ratio is below the range for countries in the same GDP per capita bracket.

Our studies also suggest that Singapore’s household-savings-to-GDP has similarly risen at a fast clip i.e. excess savings are present. That explains why take-up for some residential launches has again touched 80%, despite various credit restrictions and high stamp duties.

Separately, we concede that the accelerated expansion of unsecured debt is a cause for concern, which may explain the government’s lending caps for car loans and credit cards in 2013.