The stock market the world over took off to a rough start in the new year. A steep fall in oil prices and worries about China caused the U.S. stocks to tumble yesterday. In Europe, the markets were hammered not only by the data coming out of China, but also from fears of North Korea reportedly detonating its first hydrogen bomb.
China’s major stock exchanges, Shanghai and Shenzhen lost 7 percent on the first trading day of the year and tanked. Chinese stock markets took another beating today and trading was halted after shares plunged 7 percent again.
The Singapore market has not been spared either. On 6 January 2016, shares closed 1.06 percent lower due to concerns about volatility in global financial markets.
Against this backdrop, Singapore Business Federation (SBF) has called for the Central Provident Fund (CPF) monies to be invested in the local shares market.
Saying that our local market is lacking vitality and vigour, SBF in its position paper recommended that the Government “should consider separating the CPF component and managing it differently as how pension funds are managed.
“This will free these funds from the GIC investment restrictions and will likely result in some investments in the Singapore market. These investments will send strong signals on our market to other investment professionals,” it said.
Explaining how the growth of our stock market has not kept up with our economic growth, SBF has pushed for CPF to be used like how pension funds are used in other countries.
“Currently, our CPF money is pooled with our other reserves and managed by GIC. Unlike other jurisdictions where their pension funds have provided strong support for their stock market, Singapore rides against the wave by specifically stating as a policy that the funds managed by GIC are to be invested abroad,” SBF’s position paper said.
Late last year, after a week of turbulence sent its stock markets spiraling downwards, China in a brazen attempt to shore up prices and restore investor confidence, allowed its pension funds to be invested in the Chinese stock market.
United Kingdom too allows its pension fund to be invested in its FTSE 100. When FTSE 100 plunged yesterday losing £30 billion, there were concerns because when such investments dive so do the value of pensions.
SBF’s position paper is backed by about 70 top executives, including Singapore Press Holdings chief executive officer Alan Chan as well as 28 trade associations and chambers.
The Federation’s 36-page proposal will be presented to Finance Minister and chairman of the Committee on the Future Economy, Mr Heng Swee Keat, on 12 January 2016.
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