Infographs about SG Budget 2018 that You Should See

Budget 2018 was announced 2 days ago on 19 February 2018. Took us a while to digest everything, especially the 2% GST hike despite the budget surplus we got. Nonetheless, after 2 days of reading, these are some of the infographics that we thought you should know about Budget 2018 that will affect you. The list is not exhaustive, there are many other things that we did not include like 10% increase in tobacco products and increase in maid levy because they don't really affect the majority of the people. But if you want to know more, there are 2 links below you can click to find out more.

Singapore Budget 2018: 9 things that will affect households and Singaporeans

12 Highlights from Heng Swee Keat's Speech

THE GOOD

SG Bonus for all Singaporeans above age 21.

I guess this is the most important part of the whole budget. The part that we are waiting for where the government will announce how much it will be giving us back. This time it is called 'SG Bonus' and is given to all Singaporeans based on their annual Assessable Income. 

Source: Ministry of Finance Singapore

GST Voucher (Cash)
In addition to giving you a 1-time cash bonus, Singaporeans above the age of 21 will also be getting a GST Voucher (Cash) this year. If you own not more than 1 property & its annual value does not exceed $21,000 and your Assessable Income for FY2017 (which is income for the year 2016) is not more than $28,000, then you will get this extra money in August 2018.

Source: GSTVoucher


GST Voucher (U-Save)
The utility bill rebate scheme. Those who own more than 1 property or private property are also not eligible for this GST Voucher. This voucher will be paid in April, July, October, and January.

Source: GSTVoucher


Enhanced Proximity Housing Grant
Families buying a resale flat near their parents or children will now receive $30,000 (previously $20,000) worth of grants. Singles who buy a resale flat WITH their parents will get grants of $15,000 (previously $10,000) and those who buy resale flat NEAR their parents will get $10,000 in grants. The definition of 'near' has also been revised from '2KM' to '4KM'

Source: Channel News Asia


Service & Conservancy Charges (SCC) Rebates
Households living in HDBs will receive at least 1.5 months of SCC rebates from Budget 2018, the same as last year.

Source: Channel News Asia


THE BAD

Increase in GST by 2%
GST will be raised from 7% to 9%. While GST increase is bad - there is no doubt about it, it won't be coming anytime soon. The increase is scheduled to be implemented between 2021 to 2025. Meanwhile, shop till you drop while you can before the increases kick in! Although GST will increase, more money will also be set aside to help those the middle and lower income household cope with the increase in GST. An extra $2 billion will be set aside for GST Voucher schemes to help the lower-income households cope with the increase in GST. Despite the increase, our GST is still one of the few lowest among the Asian countries.

Source: Bloomberg

Increase in Buyer Stamp Duty (BSD)
If you are looking to buy a home that cost more than $1million, then you better be prepared to pay extra 1% of BSD for any amount above $1million. This is to ensure that those who can afford to buy a more expensive home pays more taxes to make society more equitable. This probably affects more for those buying private properties and less on those buying HDBs. Then again, HDB prices are also rising, so maybe it won't be soon before HDBs also hit that $1million bracket.

Source: IRAS


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#ICYMI: Uber is planning to sell majority stake in its Southeast Asian unit to competitor Grab

After years of fighting for dominant market share, Uber has finally thrown in the towel and deciding to sell Grab a majority stake in its Southeast Asian unit to its regional competitor Grab. This decision will have important effects in the market especially for existing players such as current taxi operators. This trend is not its first as Uber is losing its market share against region-focused players such as Lyft, Didi Chuxing and Grab. A good case study to evaluate its market impacts is China.

China market
Several years before Uber conceded its Southeast Asian territory, it lost its fight in China against Didi Chuxing. The China taxi industry is huge with an estimated of 1.1 billion daily commutes. Even with such market size, the ride-hailing market has since consolidated largely between traditional taxi operators and tech platforms such as Didi Chuxing. Different from Singapore, the China ride hailing market has consolidated with Didi Chuxing being the main player, possessing more than 80% of the market. This could likely be a key movement after Southeast Asia's consolidation.

Having a monopolistic market as a ride hailer, Didi Chuxing has reigned in on discounts and bonuses for both drivers and consumers. The discount-centric model was unsustainable and the company is transiting back to profit-focused model. Consumers previously attracted by the lower fares are now looking to switch back to taxi operators as they are more affordable comparing to surge pricings. Ridership dropped by 40% for some time after subsidies were withdrawn. Although the national government has lifted regulations governing ride-hailing, local cities implemented their own rules specifying stringent criteria to qualify as a private hire driver. For example, Beijing and Shanghai require all drivers to have a local residence permit before they can drive. This resulted in a significant drop in supply of drivers and indirectly raising the price paid by consumers. Consumers are also finding it more difficult to hail a ride on the app. There is prevalent negative consumer feedback where 81.7% of consumers find it more difficult to hail a ride. As such, consumers are slowly turning back to taxis as a solution. This can potentially increase the growth of China taxi market to moderate as parties look to negotiate deals that will appease the majority.

In the taxi industry, there is strong network effect where consumers tend to look for the largest taxi company as this assures them the least waiting time and highest chance of getting a taxi. Being a taxi driver (potential leasee of the taxi company), it is best to go to the largest taxi company which can reach the largest pool of consumers. This cycle reiterates itself, allowing the taxi company to grow.

The current SG market

Comfort Delgro (CDG) owns the largest fleet size in Singapore of approximately 17,000 taxis or 61% of the market. As a result, it has strong network effect present in the Singapore market. There are also low competition rivalry from other taxi rental companies, as taxi annual fleet growth is capped at 2% enforced by LTA. CDG is likely to remain the largest taxi company in Singapore.

Traditionally, there is low competition from other taxi companies such as SMRT and TransCab. However, when the disruptors entered the market, it has faced structural challenges where Uber and Grab are offering heavily discounted prices to consumers and drivers. In addition, Grab has formed strategic partnerships with other taxi companies, such as Prime and SMRT. This has eroded CDG’s market leadership where its traditional competitors now have a higher combined fleet size.

In response to obtaining the network effect, disruptors also offer steep discounts and incentives, compared to taxi companies, to attract potential drivers or existing taxi drivers. TODAY has reported that at least 3,000 CDG drivers have switched operators [TODAY, 29 September 2017]. CDG has also responded by offering similar discounts to taxi drivers and consumers, increasing its marketing efforts and investing into its booking apps.

The taxi industry also faced an uplift in marketing costs to match the discounts and promotions offered by disruptors to retain its market share. This has extensively eroded the competitive advantage of network effect and increase the overall supply of drivers who can fulfil the need of private transport. These increased its operating costs and squeezed margins, while losing its competitive advantage of network effect. It is now the second largest private transport fleet, behind private hire companies, Grab and Uber. CDG and Uber previously announced a partnership to enhance user experience where Uber can tap on CDG's existing fleet to boost driver supply. With Uber's new decision, there is likely to be changes with the partnership and possibly, negative impacts on CDG as Grab nabs more market share.

There are massive synergistic revenue generation from its automotive engineering business with CDG’s taxi fleet. Previously, with high taxi fleet utilisation, CDG enjoys high engineering revenue as more taxis are being brought for maintenance and servicing. CDG also sells diesel to its taxi drivers. However, with Uber and Grab attracting its drivers away, CDG is facing a drain on both businesses as they are highly correlated.

What is unknown now is whether Grab will transit to a profit-focused strategy, similar to what Didi Chuxing is employing. If so, the consumer preference shift might also be witnessed and CDG could prove to be an attractive buy right now. However, only time will tell as Grab is also focusing on its e-payment platform and may continue its discounts to synergise that area. What is known now is that consumers will flock to whoever provides more value for lower prices and who has the biggest coffers to sustain that will survive.

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Good Stock Market Performance in January = Good Stock Market Performance for the Year?

January 2018 is a great month for the stock market, and probably a good start too!
The Straits Times Index (STI) is up about 3.4% for the month of January.
The S&P500 is up about 5.6% in the same month.
But does this mean that stocks will continue to do better for the rest of the year?
Here's a short video clip to explain if this will happen.

Recommended Post: Save $ in Singapore Savings Bonds or CPF?

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