Singapore's resilient savers, and a question over the wealth gap

Singapore

A SLEW of recent surveys from financial institutions point out that for those who can save, they have set aside buffers to insulate against financial threats from the health crisis that is Covid-19. But the data may also point to the widening wealth gap wrought by a global pandemic.

The latest edition of the Allianz Global Wealth Report showed this week that Singapore households are estimated to have seen asset growth of 5 per cent in the first six months of the year, in spite of the pain brought on by the global pandemic.

It reflected a disciplined savings approach, with the report suggesting that Singaporean households might be able to weather the pandemic crisis in 2020.

Growth in gross financial assets of Singapore households in 2019 stood at 9.3 per cent, clocking the fastest increase in seven years. This was driven by strong growth in insurance and pensions of 11 per cent. Bank deposits' share of assets rose 8 per cent to 34.9 per cent, while securities - which had a portfolio share of 16 per cent - posted growth of 7 per cent.

A separate survey by Standard Chartered this week said that about four out of five in Singapore said the pandemic has made them more careful with their spending, above the global average of 75 per cent. Individuals aged 45 and above were more likely to be more cautious than those aged 18 to 44, according to the poll.

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StanChart polled 12,000 consumers aged 18 and above, across 12 markets - including Singapore, Malaysia, Hong Kong, the United States and the United Kingdom

Singapore respondents have also been prioritising their needs over wants. Consumers here said they spent about 25-52 per cent more on groceries, digital devices and healthcare compared to before the pandemic, but spent less on clothes. Naturally, given travel restrictions, they also spent less on holidays.

Almost 80 per cent of respondents in Singapore said they would like to be better at managing their finances, Stanchart said. Six in 10 also said the economic impact of the pandemic has made them more likely to track their spending.

Meanwhile, of the Singapore investors polled by Fidelity International, 52 per cent of these investors think they have insufficient savings to achieve future goals - but this is the smallest percentage of those concerned, when compared across the four markets of Singapore, China, Hong Kong and Japan.

The regional average proportion of investors who think they do not have enough savings to sustain them through the future is at 65 per cent.

Close to 60 per cent of the Singapore respondents said they had reduced discretionary spending and spending on essential items, while 47 per cent said they had cut the amount of money saved. To add, 86 per cent of them remain invested in the four markets - the highest among the four markets polled. Fidelity's survey, results of which were published on Thursday, polled 2,434 investors.

Fidelity International head of South-east Asia and Middle East Lawrence Hanson said the survey showed a majority of the respondents are taking a long-term view on the market and their finances. For these respondents, they have the option to adjust daily spending habits, rather than "sacrifice long-term portfolio gains".

But numbers may also reflect an overall widening gap between the haves and the have-nots. The survey by Fidelity, for example, polls Singaporeans who are able to invest in the first place.

DBS, Singapore's largest bank, in August said a third of its customers had negative cash flow in January to June 2020, with money flowing out of their accounts on average exceeding the amount of money going into the same accounts. The bank studied its pool of customers who have salaries credited into DBS/POSB accounts.

Its data also showed that low-income earners are bearing the brunt of the prolonged economic slump caused by Covid-19. The pandemic is a "highly regressive" event which could potentially widen the income gap in Singapore, DBS senior economist Irvin Seah said in August.

As at May, more than 300,000 - or 26 per cent - of 1.2 million DBS customers have experienced a decline in income of more than 10 per cent. Among these affected customers, about a third suffered even sharper income deterioration in excess of 50 per cent, figures from DBS showed.

The extent of income deterioration was found to be most pronounced in the lower-income group. Lower-income earners (S$2,999 and below) constitute about 49 per cent of DBS customers that saw a drop in salary. Within this group, about half saw their income fall by more than 50 per cent. Those between ages 35 and 44 accounted for the highest share of affected workers. Specifically, the income of more than half (56 per cent) in this age group plunged by 30 per cent or more, despite older workers being "marginally" more vulnerable to income deterioration.

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 their potential risk, said DBS.

The Allianz Wealth report pointed out that globally, the wealth gap between rich and poor countries has widened. In 2000, net financial assets per capita were 87 times higher on average in advanced economies than in the emerging markets. This ratio fell to 19 in 2016. In 2019, it rose to 22.

And for the first time, the number of members of the global wealth middle class has fallen significantly from just over one billion people in 2018 to just under 800 million in 2019.

Ludovic Subran, Allianz chief economist, said in the report: "Zero and negative interest rates are a sweet poison. They undermine wealth accumulation and aggravate social inequality as asset owners can pocket nice windfall profits. It is not sustainable...We need more than ever structural reforms post-Covid-19 to lay the foundation for more inclusive growth."