Key Financial Trends of January 2024

Economists Optimistic for Singapore in 2024

In the last quarter of 2023, Singapore’s economy grew at a quicker clip than expected, reporting a 2.8% year-on-year (YoY) growth. Analysts in a Bloomberg poll believed this figure would only come in at 1.8%. What’s more, the Lion City’s economy grew just 1% on a YoY basis in the previous quarter.

This prompted economists to be more optimistic for 2024, projecting a growth rate for Singapore between 2–3%. Experts cited the recovering global demand for electronics, development in artificial intelligence, and potentially increased tourism revenue from Chinese travellers as several factors fuelling Singapore’s growth.

Additionally, headline inflation is projected to drop to 3% this year, down from the current estimate of 4% in the final quarter of 2023. However, high prices for households continue to persist because of the recent hike in Goods and Services (GST) tax and other charges. These include water prices and public transportation fares.

According to Dezan Shira & Associates, several local industries to watch in 2024 are electronics, manufacturing, food & beverage, travel, and hospitality. Although manufacturing is expected to have a tepid 2024, the sector is projected to bounce back from 2025 onwards and even outstrip China’s growth in manufacturing output.

What This May Mean For You

As mentioned above, high prices will be a problem for almost everyone in Singapore even though inflation is set to dip. Akin to what was highlighted in the December issue of Key Financial Trends, having an emergency fund is crucial. This allows you to absorb the shock from anything that comes your way, such as a retrenchment or health crisis.

Additionally, investing prevents inflation from eroding the value of your cash. There are various long and short term solutions you can seek out, depending on your financial goals. For instance, the Singapore Savings Bond is a low-risk investment which lets you earn a fixed income. It’s highly liquid to boot, with no penalty fee levied for early redemptions.

[Best high-yield savings accounts in Singapore]

Related: Singapore’s Economic Outlook for 2024

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China Announces 5.2% GDP Growth in 2023

At the recent World Economic Forum in Davos, Switzerland, Chinese Premier Li Qiang announced that China’s economy grew by 5.2% in 2023. A day later, the country’s National Bureau of Statistics officially unveiled the data. Along with a 5.2% GDP growth across 2023, China’s growth in the fourth quarter of 2023 was recorded at 5.2% too.

Although China missed its fourth quarter estimates by 0.1%, its GDP growth for the full year was much higher than 2022’s 3%. As the Chinese government cracked down on real estate developers, investment capital was redirected into the infrastructure and manufacturing sectors.

Kang Yi, the Director of China’s National Bureau of Statistics, said the nation’s property sector is in a process of “adjustment and transformation”. He added that China’s economy will face several challenges this year, including relatively low domestic demand, overcapacity in certain industries, and weak expectations about its future.

Another challenge China is facing would be scepticism surrounding its GDP figures. Independent experts agree that China’s economy definitely grew in 2023, along with its steep drop in real estate construction. However, they posit that China overstated its GDP growth in 2023 because of generally flat investment figures.

What This May Mean For You

The world’s second largest economy may have bounced back, but its stocks have not reflected that yet. The MSCI China Index was the second worst performer in 2023, declining by 11%. Investments in real estate dropped throughout 2023 as well, even as China’s government implemented measures to encourage home purchases.

With that being said, there’s a brighter outlook for China in 2024 after it released its economic data earlier this month. Additionally, around 30% of respondents in a Bloomberg survey said they would increase their investments in the Chinese market, believing that stock prices at their current levels represent a prime opportunity.

If you feel the same way about Chinese stocks or bonds right now, do your due diligence before investing. Don’t invest in a market or asset just because it is currently trending and/or heavily discounted.

[Check out the best online brokerages in Singapore]

Related: The Future of Chinese Tech Stocks — Is It Time To Invest In Them Again?

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Spot Bitcoin ETFs Receive Approval in the US

On 10 January 2024, the US Securities and Exchange Commission (SEC) approved 11 Spot Bitcoin exchange-traded funds (ETFs). This watershed moment for cryptocurrency came a decade after the very first application was filed by Gemini founders Cameron and Tyler Winklevoss.

The issuers of the Spot Bitcoin ETFs include BlackRock, Fidelity, GrayScale, Invesco, and VanEck. After the first six days of trading, all ETFs now hold approximately 95,000 Bitcoin combined. BlackRock and Fidelity’s solutions saw the largest inflows, with both products amassing around US$1.2 billion in those six days.

However, Vanguard did not join its fellow asset management firms in applying for a Spot Bitcoin ETF. Additionally, the company has pulled all cryptocurrency products from its platform. The Monetary Authority of Singapore (MAS) also said that these ETFs are not approved for retail investors in the Lion City.

On the bright side, with Spot Bitcoin ETFs receiving approval, all eyes are now on Ether. The second largest cryptocurrency by market cap does have several Spot ETFs waiting to be approved. The SEC has until 23 May to make a decision on the applications by Ark 21Shares and VanEck.

What This May Mean For You

Cryptocurrency is still a highly speculative asset class, even though it’s been 16 years since Bitcoin was created. Furthermore, Gary Gensler, Chair of the SEC (which approved the Spot Bitcoin ETFs), has a firmly anti-cryptocurrency stance. Should you decide to invest in cryptocurrency directly or via the Spot ETFs in the US market, do be extremely cautious.

Remember, you should only invest an amount which you’re willing to lose entirely. Additionally, think of cryptocurrency as an alternative investment in your portfolio. It should only take up a small percentage of your assets, balanced by investments like equities, fixed income, and commodities.

Related: A Guide To Exchange-Traded Funds (ETFs) In Singapore

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Singapore and Malaysia Sign MOU on New Special Economic Zone

On 11 January 2024, Singapore and Malaysia signed a Memorandum of Understanding (MOU) regarding a new Johor-Singapore Special Economic Zone (SEZ). The two countries announced in July 2023 that they would set up a task force to study this idea. After signing the MOU, Singapore and Malaysia are set to work on a full agreement.

They announced that an update will be provided at the 11th Malaysia-Singapore Leaders’ Retreat later this year. Several initiatives leading up to the SEZ include passport-free clearance in Johor and Singapore, a one-stop business/investment service centre in Johor, and digitised cargo clearance processes at the two land border checkpoints in Singapore.

Earlier that day, Singapore Prime Minister Lee Hsien Loong and Prime Minister of Malaysia Anwar Ibrahim also met to commemorate the Johor Bahru-Singapore Rapid Transit System (RTS) Link completing 65% of construction. The RTS Link is set to begin operating in end-2026, aiming to ease road congestion and boost connectivity between the two countries.

In a joint statement on the SEZ, Singapore and Malaysia said “the SEZ underscores what Singapore and Malaysia can achieve when our governments and business communities work closely together”.

Additionally, it said “the project presents an unprecedented opportunity to enhance the cross-border flow of goods and people as well as elevate the economic attractiveness of both Johor and Singapore”.

What This May Mean For You

You’ll still need your passport for a few more years when you make the trip to Johor Bahru, but the end is tentatively in sight. This is something that is long-awaited by both Singaporeans and Malaysians. Industry leaders have also declared that the SEZ is a “win-win” for Singapore’s and Malaysia’s economies, should this be implemented correctly.

If you wish to invest in property near the Causeway on both ends, or simply build up your capital for 2025 or 2026, do check out this handy guide. Having an open link between Singapore and Johor also means more employment and business opportunities for individuals in both nations.

You might want to use these couple of years to conserve your wealth if you want to make a lump sum investment or large business decision then.

Related: Five Ways to Diversify Your Investment Portfolio

Read More:

• 5 Singaporean Blue-Chip Stocks to Watch in 2024
• 2024 Outlook for Singapore’s Property Sector, and Top S-REITs to Look Out For
• Salary Increments and Pay Raises in Singapore – How Much to Expect in 2024 and the Near Future
• How to Start Planning For Retirement in Your 20s and 30s
• How to Achieve FIRE With the DINK Lifestyle in Singapore

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