Does Singapore feel cheap ?

 

I've been busy preparing for the next community session where I will do some thinking about China, so I've been using the book The 10 Rules of Successful Nations by Ruchir Sharma to come up with a few pointers on how to think about China. The aim is not to be the final word on China, as I'm sure there are better investors out there on this topic, but a guide on how to interpret the news in a better way.

There is one point of analysis that I will not include in my presentation which I think I can share on this blog. 

One of the rules of a successful nation is that it must feel cheap at least to foreign visitors. 

This is a strange criterion because it is a subjective feeling of a country. Another criterion is that this is from a foreign perspective, so Singaporeans can't be arbiters as to how cheap we are. For me, Kuala Lumpur definitely feels cheap but the Gold Coast in Australia, with its $3 doughnuts feels quite expensive.

If I were to venture a guess as to whether Singapore feels cheap, I would venture to guess that foreigners should find Singapore expensive. The price of vehicles is enough to prove the point. Another rude shock is probably the price of beef that can be expensive compared to back home. but on the other hand, if the foreigner lives like a local, our hawker centre fare is way cheaper than many other countries. And let's not even think about the cost of domestic help.  Up until recently, you can even get Michelin star fare for less than $10 here.  

The author speculates that having a currency that feels expensive can be a powder keg if this is combined with an increase in the current account deficit.  When this happens, it is normally the locals who will flee the local markets and send their capital elsewhere. 

Thankfully when I checked our numbers out we are still on a surplus. 

The author suggests looking for cases where the country feels expensive followed by ballooning current account deficit to predict a crash. When the balance of payments gets restored to a surplus, investors should be able to earn a fortune from the market recovery. 

I still haven't figured out where to make out this game plan but I suspect a few of our neighbours might make great candidates.