As mentioned in the first post of the year on Loopholes SG, the SG budget is designed to provide support to sustain businesses and maintain employment rates. As investors and traders, we should also reflect on this strategy and react accordingly. As we know, certain businesses are already hit by the downturn even before the Covid-19 outbreak. Therefore, how should we then adjust our projections for the rest of the year while staying rational benefiting from the downturn? In this post, I will be sharing key strategies to brave through the environment of fear and pessimism.
Businesses are subsidized (Jobs Support Scheme)
“The Jobs Support Scheme (JSS) will help enterprises retain their local employees during this period of uncertainty. It is a temporary scheme for 2020. All active employers, with the exception of Government organizations (local and foreign) and representative offices, are eligible for the JSS.”
“Some other businesses such as Grant Property Tax (“PT”) Rebate to licensed hotels (30%), serviced apartments (30%), prescribed Meetings, Incentive, Conferences and Events (“MICE”) venues (30%), and other qualifying commercial properties.” – Our airpost and cruises will get 15% while our integrated Resort in Sentosa and Marina Bay Sands will also be getting a 10% Property tax rebate for 2020.
Additionally, registered companies will also get a rebate of 24% (8% per month of up to $3600 excluding CPF) of a month’s wage for each employee that they have paid from October to December of 2019. This equates to a 2% salary rebate to each company if everyone is paid $4500 gross salary. Along with the $15,000 Corporate Income Tax (CIT) for 2020, companies’ cash flow problems will be alleviated amidst the downturn and Covid Virus outbreak. Overall, I see these measures as a form of stimulus for the economy to continue running in 2020 with lesser financial challenges.
The risk appetite of the nation will drop
When the economy is not thriving, there will be a likelihood of lesser risk-taking behavior. Examples would include less job-hopping, greater productivity and more upskilling to stay relevant in the company. On the finance front, fewer people will be willing to put their capital at risk and will be more inclined to switch to lower-yield options.
This is where more counters in markets continue to dip despite stable or decent fundamentals. My suggestion to investors is to put their money only if they hold for the longer term. In the meantime, focus on dividend yields during the downturn and accumulate in tranches to reduce paper losses. The logic behind this method is to leverage on lower equity prices amidst the downturn instead of putting your money into fixed deposit accounts where the yields are much lower when the lockdown period might be identical to the time required for our market to recover.
See opportunity when other’s are fleeing
During tough times in the markets, investors are bound to get wary about the problem overextending beyond their expectations. As the famous saying goes, “The market can stay irrational longer than you can stay solvent.” – John Maynard. This quote basically reinforces the idea that investors usually give up the game before it ends. Much like a team sport, usually, a game might be slightly lopsided in terms of game points. This projects the illusion that the game is lost for the team with lower points. However, since the game has not ended, there are always opportunities for a turnaround provided that the team stays objective and united.
Similarly speaking, when it comes to investments, some people might also likely cut losses before their stocks regain their upsides. As such, I would like to affirm that the game plan to stay objective is essential when certain stocks are underperforming. This will allow investors to make better decisions over time as they are more focused on the long term outlooks.
Closing Thoughts
Businesses are subsidized and many are pessimistic due to the many challenges contributed by the economy and the Covid-19 outbreak. Practice personal discretion when it comes to investment decisions because your stake will often vary in many aspects with the next person. That means that your tolerance for paper losses, investment duration will also differ greatly. Hence, there is no need to emulate the next “wise person”, instead, we should always calibrate our own game plan accordingly to maximize our opportunities and stay rational during uncertainties and even panic.
References: Singapore Budget 2020 from Singapore Budget Annex A
