Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

How to Profit From China’s Economic Role Model: Singapore

Economics / Asian Economies Apr 21, 2010 - 06:44 AM GMT

By: Money_Morning

Economics

Best Financial Markets Analysis ArticleMartin Hutchinson writes: China's economic model has been extraordinarily successful. But the Asian giant didn't create it out of thin air.

It had a role model.


A generation before China began to take off, another smaller country - also dominated by an ethnic Chinese populace - demonstrated how rapid growth could be combined with political stability.

I'm talking, of course, about Singapore.

Last week, Singapore demonstrated yet again that it might well have the answer to some of China's current problems. The Asian island city-state said its economy grew at an annualized rate of 32% in the first quarter - and then revalued its currency in order to prevent the Singapore economy from overheating.

As investors, we need to look at the mentor, as well as at the pupil.

A Global Leader Gets its Start
Singapore gained independence from Britain in 1959 and immediately elected Lee Kuan Yew as prime minister. He ruled the country for 31 years, after which his handpicked deputy ruled for 14 years. Lee's son, Lee Hsien Loong, took over in 2004 as the third and current Singapore prime minister.

So essentially Singapore's economic success is the work of one family, even one man (Lee Kuan Yew is still with us, in fact, serving as Singapore's "Minister Mentor.")

Although Lee Kuan Yew had been elected in a loose alliance with the Communists, he followed a free-market economic policy, but one in which the overall direction of the economy was set by the government. Taxes rates in general were low, government spending was kept at a remarkably low level - currently 15% - in terms of gross domestic product (GDP), and foreign investment was aggressively encouraged in most sectors.

Lee also solved the problem that is currently vexing the United States and other rich countries by privatizing social security and unemployment insurance: It forced employees to pay contributions into a " Central Provident Fund" that operated individual accounts out of which unemployment payments, health-insurance premiums and, eventually, pensions were paid.

Thus the area of the economy over which the state exercised direct control remained limited, while the Central Provident Fund exercised considerable influence on behalf of its account holders.

Overall, Singapore became the world's leading trade entrepot, aggressively moving up the global value chain as its per-capita GDP increased and its citizens became richer and more educated. With per-capita GDP now estimated at $50,300, Singapore is actually now richer than its U.S. counterpart.

And that's not all the sovereign city-state has going for it. Singapore's economic openness is actually quite remarkable by world standards: It ranks second in the world on the Heritage Foundation's Index of Economic Freedom, and has also remained remarkably uncorrupt, ranking third on Transparency International's 2009 Corruption Perceptions Index.

A Role Model for China
This combination - a free-market economy under a high degree of direction by a government that retains firm political control (though Singapore was and remains a democracy) - was highly attractive to China's leaders, particularly the late Deng Xiaoping, as they sought ways to open up their economy from the 1980s.

The Chinese leadership has maintained tighter political control than the Singapore government, imprisoning - and even executing - dissidents, and not allowing free elections. It also retained a high degree of state control of industries it considered strategic, such as oil, steel and anything related to defense.However, like Singapore, China has welcomed foreign investment - and at least on the surface has pursued a policy of relatively free trade, low taxation and relatively low public spending.

Apart from its lack of democratic freedoms, China's principal failure to match Singapore has come in the areas of economic freedom (including secure property rights) and corruption - the Asian giant ranks only 140 th out of 179 countries on the Index of Economic Freedom and 79 th out of 180 countries on the Corruption Perceptions Index.

Still, China has labor costs that are nowhere near as high as those of Singapore, meaning the larger country retains considerable room for inefficiency. Nevertheless, as it gets richer, moving up the Heritage Foundation and Transparency International lists should be a top priority for China.

How to Play Singapore for Profit
Singapore's recovery from the 2008-09 recession has been rapid. By advancing at an annualized rate of 32%, Singapore's economic growth for this year's first quarter outpaced the same measure for the first three months of 2009 by a stunning 13.1%.

The Monetary Authority of Singapore (MAS) - the nation's central bank - raised its exchange-rate target for the Singapore dollar by an undisclosed amount of 2% to 3%. The objective: To keep the Singapore economy from overheating and boiling over.

Needless to say, rapid economic growth and danger of overheating is a problem for China, too, and a modest revaluation of the yuan may well prevent economic overheating and inflation, quite apart from making the U.S. Congress happy. For all those reasons, China is believed to be carefully watching the results of the MAS' reaction to Singapore's torrid growth.

While Singapore is a relatively small economy - with a GDP of only $165 billion in 2009 - its exalted positions in wealth, economic freedom, clean government and clean business make it a highly attractive place to invest in. Of course, the rest of the world is aware of this, so the Singapore stock market normally trades at a fairly steep valuation. Still, its current valuation of 19 times earnings make it an absolute bargain when compared with its much-slower-growing U.S. counterpart (the Standard & Poor's 500 Index is currently trading at an almost-equally lofty Price/Earnings (P/E) ratio of 18).

The problem with Singapore investments is that the Sarbanes-Oxley mess has deterred Singapore companies from obtaining New York listings, so there are now no companies with U.S. listings beyond the so-called " Pink Sheets." If you have a broker that allows you to invest directly on the Singapore Stock Exchange, that is not a problem.

For those who don't have such a broker, I recommend the iShares Trust MSCI Singapore index Exchange-Traded Fund (NYSE: EWS), which has net assets of $1.6 billion and an expense ratio of only 0.55%.

Source : http://moneymorning.com/2010/04/21/singapore/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules