Inflation erodes away bank savings
Published March 10, 2008
Inflation erodes away bank savings
Banks cut fixed deposit rates; but cautious investors stay liquid in face of market volatility
By SIOW LI SEN
(SINGAPORE) Cash-rich Singaporeans averse to risky alternatives are in an unhappy spot of having their savings eroded by inflation.
Not only is inflation clearly on the rise - it hit a 26-year high of 6.6 per cent in January - banks are further cutting their already miserable deposit rates.
Last week, DBS Bank slashed its fixed deposit (FD) rate again to 0.9 per cent for a 12-month deposit of $1 million. The latest revision is less than half of the 2.02 per cent it offered on Jan 2.
And OCBC Bank's 12-month FD rate has been lowered to 1.2 per cent from 1.4-1.8 per cent last year. This is for amounts between $500,000 and $1 million.
Despite the paltry returns on deposits, those with spare cash appear to have few choices beyond the safe haven of banks. In January - the latest month for which data is available - savings and demand deposits jumped 24 per cent to $143.1 billion, swelled by high bonuses paid out after a robust year.
But fixed deposit growth slowed for the 10th straight month. It was up 7.6 per cent to $171.4 billion, versus an average of 18 per cent in 2007.
'The trend in the past seven years is that when interest rates rise, people take money from savings and current accounts and place it in FDs,' said Standard Chartered's general manager of wealth management Dennis Khoo. 'When interest rates fall, the reverse happens. Now, when the gap is no longer large, there is no incentive. So people forget to shift to FDs.'
Typical interest rates for savings and demand deposit accounts are 0.3 per cent.
Interestingly, bankers said that generally, people with excess cash don't seem to be using it to pay down loans such as mortgages.
'We review our interest rates regularly and have recently adjusted them downwards in line with the market,' said Fabian Lum, OCBC Bank's vice-president for group wealth management (deposits). 'We have not seen significant withdrawals of fixed deposits by our customers or changes to how they make use of such products.'
Some observers reckoned that money is left in savings and demand deposits accounts while people mull the choices of higher returns elsewhere.
'With global interest rates likely to dip further, some investors prefer to stay liquid,' said Winston Teo, United Overseas Bank's head of deposits, investments and insurance. 'That said, in a climate of stock market volatility, there will be opportunities and it may be a good time to pick up some bargains as some equity valuations have fallen to attractive levels.'
Bankers said that customers are asking about higher-yield products, though caution seems to be the order of the day.
Some of the more gung ho are venturing into foreign currency products.
Helen Neo, Maybank's head of consumer banking, said that the bank is seeing greater investment in structured deposits that are principal protected and also offer higher returns. 'We are also seeing growth in foreign currency time deposits,' she said.
Stanchart's Mr Khoo said that since August last year, the bank has sold more than $400 million of deposit-type products, principal protected and capital guaranteed.
As for Stanchart's dual currency product, sales have grown three to five times since September last year, he said.
Re: Inflation erodes away bank savings
Published March 10, 2008
S'pore needs to save for the future
What can go up can also go down, cautions PM Lee
By ARTHUR SIM
PRIME Minister Lee Hsien Loong reiterated the objectives of the recent Budget at a grassroots event yesterday, after noting that the public had put less emphasis on the 'long-term initiatives' and focused instead on short-term 'hongbaos'.
'The assumption which some people had is that we are now rich and we can afford to spend more,' he said.
'This is a very dangerous way of thinking and it worries me a lot. We are here, strong, because we have saved and been frugal and haven't just thrown money away,' he stressed.
Mr Lee also made the point of saying that Singapore is admired around the globe. 'They know that in Singapore, it is a society that is working, people are cohesive. And when you have a Budget, people smile, and there is a distribution that makes sense. Not just money all around,' he said.
His comments came after Hong Kong's recent Budget, which was released two weeks after Singapore's, stole some of the republic's thunder.
The Hong Kong Budget had been widely considered more aggressive by pundits. Hong Kong had cut personal income tax by one percentage point to 15 per cent on top of a one-off 75 per cent tax rebate, capped at HK$25,000 (S$4,451). Singaporeans got a one-off 20 per cent tax rebate, capped at $2,000. However, saying that many of the components were 'very similar to what we did', Mr Lee pointed out that both countries addressed health care, lower income workers and personal income tax.
Although conceding that Hong Kong was perhaps more generous on the last point, Mr Lee added: 'I am sure (the Hong Kong government) studied what we have done and have adapted it.'
But while he said that both countries had done well economically last year, Singapore had to 'keep saving and investing in the future in order to generate growth and resources to keep Singapore strong'.
'What can go up can also go down,' he cautioned.
The prime minister was speaking at the opening of the Anchorvale Community Club in which he also took the opportunity to speak for the first time on the escape of terrorist Mas Selamat Kastari.
Security at the event was noticeably higher, with the unusual appearance of police sniffer dogs.
On the escape of fugitive Jemaah Islamiah leader Mas Selamat, Mr Lee said: 'Security forces will learn from this mistake and grow from it. We must make sure that it does not happen again because it is a continuing problem we are dealing with.'
The outlook for Singaporeans, however, is bright.
Mr Lee said: 'We emphasise self-reliance and the free market but we do not leave Singaporeans to fend for themselves.'
He said that the government would 'do its best to invest in Singapore and make it more competitive, so that the economy and the free market can create prosperity for all of us'.
Anyone who might still have some doubts would certainly have left the event inspired. MP for Ang Mo Kio GRC Lam Pin Min gave a surprise performance of Josh Groban's hit, You Raise Me Up, for which he earned a standing ovation from Mr Lee.
Re: Inflation erodes away bank savings
Quote:
Originally Posted by mr funny
Published March 10, 2008
S'pore needs to save for the future
What can go up can also go down, cautions PM Lee
By ARTHUR SIM
PRIME Minister Lee Hsien Loong reiterated the objectives of the recent Budget at a grassroots event yesterday, after noting that the public had put less emphasis on the 'long-term initiatives' and focused instead on short-term 'hongbaos'.
'The assumption which some people had is that we are now rich and we can afford to spend more,' he said.
'This is a very dangerous way of thinking and it worries me a lot. We are here, strong, because we have saved and been frugal and haven't just thrown money away,' he stressed.
Mr Lee also made the point of saying that Singapore is admired around the globe. 'They know that in Singapore, it is a society that is working, people are cohesive. And when you have a Budget, people smile, and there is a distribution that makes sense. Not just money all around,' he said.
His comments came after Hong Kong's recent Budget, which was released two weeks after Singapore's, stole some of the republic's thunder.
The Hong Kong Budget had been widely considered more aggressive by pundits. Hong Kong had cut personal income tax by one percentage point to 15 per cent on top of a one-off 75 per cent tax rebate, capped at HK$25,000 (S$4,451). Singaporeans got a one-off 20 per cent tax rebate, capped at $2,000. However, saying that many of the components were 'very similar to what we did', Mr Lee pointed out that both countries addressed health care, lower income workers and personal income tax.
Although conceding that Hong Kong was perhaps more generous on the last point, Mr Lee added: 'I am sure (the Hong Kong government) studied what we have done and have adapted it.'
But while he said that both countries had done well economically last year, Singapore had to 'keep saving and investing in the future in order to generate growth and resources to keep Singapore strong'.
'What can go up can also go down,' he cautioned.
The prime minister was speaking at the opening of the Anchorvale Community Club in which he also took the opportunity to speak for the first time on the escape of terrorist Mas Selamat Kastari.
Security at the event was noticeably higher, with the unusual appearance of police sniffer dogs.
On the escape of fugitive Jemaah Islamiah leader Mas Selamat, Mr Lee said: 'Security forces will learn from this mistake and grow from it. We must make sure that it does not happen again because it is a continuing problem we are dealing with.'
The outlook for Singaporeans, however, is bright.
Mr Lee said: 'We emphasise self-reliance and the free market but we do not leave Singaporeans to fend for themselves.'
He said that the government would 'do its best to invest in Singapore and make it more competitive, so that the economy and the free market can create prosperity for all of us'.
Anyone who might still have some doubts would certainly have left the event inspired. MP for Ang Mo Kio GRC Lam Pin Min gave a surprise performance of Josh Groban's hit, You Raise Me Up, for which he earned a standing ovation from Mr Lee.
trying to please both sides, he will be in big trouble in future.
Re: Inflation erodes away bank savings
Quote:
Originally Posted by Unregistered
trying to please both sides, he will be in big trouble in future.
Can't spoil ppl with "hongbao" and generous subsidy lah. Let's focus on economy growth and the rest will fix it by itself.
Let's the sour grapes continued to cry out ppty price too high and so on. Ppl should know that to survive in this world is based on your own ability and capability. If you can't afford a condo, then don't complain. Just settle in HDB.
