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Thursday, September 24, 2020 – 1:28 PM
Several recent surveys of financial institutions indicate that for those who can save, they have reserved buffers to protect against the financial threats of the health crisis that is Covid-19. But the data may also point to the growing wealth gap caused by a global pandemic.
The latest edition of the Allianz Global Wealth Report this week showed that Singapore households are estimated to have seen asset growth of 5 percent in the first six months of the year, despite pain from the global pandemic. It reflected a disciplined savings approach, and the report suggests that Singaporean households could weather the pandemic crisis in 2020.
The 5 percent asset growth, he said, “is a strong indication of a positive result for the full year, given that there is no further dramatic deterioration in the economic and healthcare environment.”
Singapore household gross financial assets growth in 2019 was 9.3 percent, registering the fastest increase in seven years. This was driven by strong growth in insurance and pensions of 11 percent. The share of bank deposits in assets increased 8 percent to 34.9 percent, while stocks, which had a portfolio share of 16 percent, posted a more “modest” growth of 7 percent.
A separate survey by Standard Chartered on Wednesday showed that roughly four in five in Singapore said the pandemic has made them more careful about their spending, above the world average of 75 percent. People aged 45 and over were more likely to be more cautious than those aged 18 to 44, according to the survey.
In keeping with the global trend of consumers shifting their spending towards commodities and digital devices, Singapore respondents have also prioritized their needs over their wants.
Consumers in the city-state said they spent 25 to 52 percent more on food, digital devices and health care compared to before the pandemic, but spent less on clothing, experiences, and travel or vacations.
Nearly eight out of 10 Singaporean respondents said they would like to manage their finances better, reflecting increased caution when it comes to spending, Stanchart said. Six out of 10 also said the economic impact of the pandemic has made them more likely to keep track of their spending.
Meanwhile, of Singaporean investors surveyed by Fidelity International, 52 percent of these investors think they have insufficient savings to achieve future goals, but this is lower than the regional average of 65 percent.
About 60 percent of Singaporean respondents said they had reduced discretionary spending and spending on essentials, while 47 percent said they had cut the amount of money saved. To add, 86 percent of them remain invested in the markets, the highest among the four markets of Singapore, China, Hong Kong and Japan. The Fidelity survey, the results of which were released Thursday, gathered 2,434 investors from these four markets.
Fidelity International’s director for Southeast Asia and the Middle East, Lawrence Hanson, said the survey showed that the majority of respondents are taking a long-term view of the market and its finances. For these respondents, they have the option of adjusting daily spending habits, rather than “sacrificing long-term portfolio gains.”
But the numbers may also reflect an overall widening gap between the haves and the haves. The Fidelity poll, for example, polls Singaporeans who are able to invest first.
DBS, Singapore’s largest bank, said in August that a third of its clients had negative cash flow from January to June 2020, meaning that the money flowing out of their accounts on average exceeded the amount of money that I entered the same accounts. The bank studied its group of clients whose salaries are credited to DBS / POSB accounts.
Their data also showed that low-income people are the hardest hit by the prolonged economic downturn caused by Covid-19. The pandemic is a “highly regressive” event that could potentially widen the income gap in Singapore, DBS senior economist Irvin Seah said in August.
As of May, more than 300,000, or 26 percent, of DBS’s 1.2 million customers experienced a decline in revenue of more than 10 percent. Among these affected customers, about a third suffered an even sharper revenue decline, greater than 50 percent, DBS figures showed.
The degree of income deterioration was found to be most pronounced in the lowest income group. People with the lowest incomes ($ 2,999 and under) make up about 49 percent of DBS clients who saw a drop in pay. Within this group, about half saw their income drop by more than 50 percent.
Those between the ages of 35 and 44 represented the largest proportion of affected workers. Specifically, the earnings of more than half (56 percent) in this age group plummeted by 30 percent or more, even though older workers are “marginally” more vulnerable to deteriorating earnings.
This may reflect that most older workers have lower wages to begin with. Support from government policies such as Workfare Special Payment and Wage Credit Scheme may have mitigated its potential risk, DBS said.
The Allianz Wealth report also noted that, globally, the wealth gap between rich and poor countries has widened. In 2000, per capita net financial assets were 87 times higher on average in advanced economies than in emerging markets. This proportion decreased to 19 in 2016. In 2019, it increased to 22.
And for the first time, the number of members of the global wealth middle class has dropped significantly from just over a billion people in 2018 to just under 800 million in 2019.
Ludovic Subran, Allianz’s chief economist, said in the report: “For the moment, monetary policy saved the day. But we must not fool ourselves. Zero and negative interest rates are sweet poison. They undermine wealth accumulation and exacerbate social inequality as an asset “. homeowners can pocket good windfall profits. It is not sustainable … We need more than ever post-Covid-19 structural reforms to lay the foundations for more inclusive growth. “
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