Category Archives: Economics

Improving Singapore – Consumer Pricing Policies

When living in any country for a period of time you will find some things that start to annoy you. This is especially so if what you experience in your current country of residence has already been “fixed” in another country that you have lived in. Soon you find yourself wishing that the government would change its policies or introduce new ones to improve your own life and hopefully that of other residents.

After eight years in Singapore I have a few things on my list of possible improvements that I’d like to share on my blog. Hopefully a local politician will read this and think my ideas make for great policy! Well, maybe not, but since I can’t vote, it’s the best way to voice my opinion that I can think of.

I’ll create separate blog entries for each idea, enabling comments to remain focused on an individual subject, rather than involving a few suggestions in one post.

The first problem is around pricing of goods and services related to hotels and F&B (food and beverage) outlets in Singapore. When you first arrive in Singapore you will hear the term “plus, plus” in reference to prices in these establishments. One “plus” refers to the 7% GST and the other to the 10% service charge. This means that you can find what looks like a great deal at a restaurant, but then realise you have to add 17% of “plus, plus” charges to the bill before making a comparison.

The interesting this is that all other GST businesses that charge GST have to show GST inclusive prices, but because hotels and F&B outlets include the service charge they are exempt because of “operational difficulties.”

Singapore recently forced travel agents and airlines to include all taxes and other charges in the advertised price which makes life much easier for the consumer. Therefore, I fail to understand what the “operational difficulties” are for hotels and F&B outlets that force an exemption for displaying consumer friendly prices.

The second problem is about the use, or rather lack of, unit pricing in supermarkets. Consumers can save time and easily determine the true value of a product by comparing its unit price on the displayed shelf label, rather than calculating it on the fly. This is useful because competitive products in the same category are often of different weights/volumes, making price comparisons more difficult than they need to be. For example, if one brand of orange juice comes in a 2L carton and another in 1.89L then the unit price can be displayed as $x.xx per 100 ml.

Even the same product can have different sizes that seem purposely created to make price comparisons a mental challenge. I’ve seen a couple of situations where specials have made it cheaper to buy two of the small volume product rather than one larger volume product! So much for saving the environment with less packaging and waste.

Unit pricing has been introduced in Australia and clearly makes it far easier to spot a bargain when comparing the products on a shelf.

If Singapore would introduce these two pricing policy changes I think that it would help reduce my personal annoyance level and hopefully that of others living in Singapore too. Although my wife says “that’s useless for us Chinese, because we are all good at maths anyway.”

TED Spread Ringing the Alarm Bells?

I’ve been watching the TED Spread move up and up over the last couple of months which has been ringing the alarm bells in my head and stopping me from returning to the share market. With news from Europe talking about banks being exposed to European government bonds then the credit system looks like it’s starting to freeze up again. The last time that happened it wasn’t pretty!

TED Spread Chat

TED Spread Chat

“The TED Spread is the difference between the interest rates on interbank loans and on short-term U.S. government debt (“T-bills”). TED is an acronym formed from T-Bill and ED, the ticker symbol for the Eurodollar futures contract.” Wikipedia

Typically the TED Spread sits between a range of 20-50 basis points. Over that range is considered a sign that there is perceived credit risk in the system. This means that with the TED Spread now over the 50 basis points mark that the bankers are not trusting each other.

You can see how good an indicator the TED Spread is for times of financial turbulence by looking at the TED Spread 5 year chart. The problems of 2008-2009 are clearly seen.

TED Spread 5 Year Chart

TED Spread 5 Year Chart

Credit, where credit is due (no pun intended), you can access this information on Bloomberg’s site.

While the current TED Spread of around 57 basis points is tiny when compared to the peak in 2009 you can see that it is definitely above the “normal” area and heading into dangerous territory.

With all the news coming out of Europe of “solutions” to their debt problems it looks like whatever the Europeans do it’s not having a material impact on the TED Spread. That translates to me as “the bankers are not buying the politicians solutions.” and that’s the reason why the alarm bells are ringing in my head!


Singtel Announces Dividend Record and Payment Date

Singtel finally announced its dividend record and payment dates for the year ending  March 31, 2011. This includes the payment of a final dividend of 9.0 cents and a special dividend of 10.0 cents. The record date is August 10, 2011 at 17:00 and the payment date is August 26, 2011.

While it is great to finally receive the notice of the record and payment dates I do wish they were far earlier! I’m not sure I want to hold onto Singtel shares for that long given the market downturn, which really seems to have taken hold in the USA, Australia and most other markets since April-May peaks.

Since my previous post I have sold my Starhub ($2.78) and SP Ausnet ($1.20) shares to try and minimize any further impact of the downturn. I’ll be keeping an eye on my other shares for the rest of June and determine which ones I can sell as I move back into cash.

I’ve also decided to start watching price movements of high dividend paying stocks around their dividend record dates to determine if a hit and run strategy makes sense for some shares. I suspect the costs of buying and selling will outweigh the benefits, but I’ll do the analysis and evaluate the approach before making a final decision.