Greater correlation among asset classes in recent years has caused some asset managers
to recalibrate their risk calculus, says Philippe Ithurbide, global head of research at Amundi
Asset Management, one of the world's biggest asset managers, with around EUR710 billion
in assets under management.
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Philippe Ithurbide, the global head of research, analysis and strategy of Amundi Asset Management, listed lessons that market participants should take away from it. He made his points at a luncheon talk organised by SMU. The global financial crisis (GFC) has many consequences for investors, he noted. Many sacred cows in finance need to be slaughtered. Some have already been questioned by the market – the market-efficiency hypothesis, the capital-asset pricing model, the use of normal distribution to describe market outcomes, the rationality of market participants and the homogeneity of traders and investors. After the GFC, many more sacred cows may have to be slaughtered. At a time when more and more people are getting increasingly exuberant about the markets, Mr Ithurbide gave a timely reminder that the road to recovery remains long and arduous.
Tweet: #Singapore consumers expect weak global #economy to hv dampening effect on #inflation: #MasterCard/@sgsmu Index http://bit.ly/WsCFn6
[Singapore, 24 January 2013] – Singapore consumers are expecting inflation to fall as they perceive that a weak global economy would likely have a dampening effect on inflation, according to the latest findings of the SKBI-MasterCard Singapore Index of Inflation Expectations (SInDEx).
The SInDEx, which was jointly developed by Singapore Management University’s Sim Kee Boon Institute for Financial Economics (SKBI) and MasterCard Worldwide, is derived from an online survey of around 400 randomly selected individuals from Singapore households.
The online survey helps researchers understand the behaviour and sentiments of decision makers in Singapore households. This is the sixth wave of the quarterly survey conducted under the collaboration and the indices were officially launched in January 2012. SInDEx was developed by Dr. Aurobindo Ghosh and Professor Jun Yu from SMU SKBI, in collaboration with MasterCard.
In the latest survey conducted in December 2012, consumers shared their views on perceived values of economic variables over the next one to five years.
Comparing the two waves of surveys conducted in September and December 2012, consumers expect inflation to moderate in the next 12 months. Their perception of the One-year-Ahead headline inflation (CPI-All Items) dropped slightly from 4.57% in September to 4.37% in December. At the same time, the forward looking SInDEx1, a composite weighted index of One-year-Ahead inflation expectations decreased to 4.4% (from 4.57% in September).
The long term Five-year-Ahead overall (or CPI-All Items) Inflation expectations also dropped to 5.21% from 5.56% in September. The Five-year-Ahead Singapore Core Inflation rate (excluding accommodation and private transportation) also decreased slightly to 4.84% from 5.20% in the September wave.
The composite Five-year-Ahead Singapore Index of Inflation Expectations (SInDEx5) in December 2012 consequently decreased to 4.97% from 5.24% in the survey conducted in September 2012.
Fig. 1
Fig. 2
Dr. Aurobindo Ghosh, co-creator of SInDEx, and Programme Director of SMU SKBI said, “Even though the United States possibly avoided falling off the fiscal cliff, many Eurozone economies are tittering on the brink of continued slowdown in productive activities and persistently high unemployment. This has created a downward pressure on global demand which in turn has manifested in low inflation rates in many Western and regional economies. Furthermore, low inflation has prompted policymakers to continue to adopt an expansionary monetary policy and more stimulus spending to kick start growth and employment generation. The concern of a spike in inflation expectations post the third sequel to Quantitative Easing (QE3) in the U.S. seems to have subsided somewhat, with the medium term inflation expectations in Singapore projected to come down in reaction to slowing trends in global demand.
“Over the last one year, the MAS Survey of Professional Forecasters (SPF) consensus forecast (currently at 4.7% for 2012) seems to be trailing previous quarters’ SInDEx inflation expectations numbers (currently, composite One-year-Ahead SInDEx1 is 4.4%), even though the SInDEx survey is conducted after every round of the SPF data release. In the medium term, despite the turmoil in the global economy, the SInDEx survey results have shown how grounded Singapore households are, so much so that even the professional forecasters with access to data and relevant market knowledge find it hard to beat their expectations.” Dr. Ghosh observed.
Dr. Yuwa Hedrick-Wong, global economic advisor, MasterCard Worldwide said, “Global economic recovery is stabilizing at a lower growth trajectory. Global demand as reflected by growth of world trade remains weak, which is an unfavourable external environment for many key markets in Asia/Pacific that are export-oriented. As a small, open, and trade-oriented economy, Singapore is also in a weaker position to leverage domestic demand for growth. Retaining its international competitiveness as a regional and global hub of finance and high-end services is therefore crucial for Singapore. In this context, rising inflation in general and wage inflation in particular could have far reaching impacts; hence the SInDEx is an indispensable tool for getting the right balance in public policy going forward.”
Methodology
Two indices were created, SInDEx1 and SInDEx5, to measure the 1-year inflation expectations and the 5-year inflation expectations. The data for the SKBI-MasterCard Survey was collected online from about 400 consumers. The sampling was done using a quota sample over gender, age and residency status to ensure representativeness of the sample. Employees in some sectors like journalism, marketing were excluded as that might have an effect on their responses to questions on consumption behaviour and expectations
About Sim Kee Boon Institute for Financial Economics
Established in July 2008, the Sim Kee Boon Institute for Financial Economics (SKBI) at the Singapore Management University promotes the study of Financial Economics and Financial Econometrics in areas of strategic relevance to Singapore's economy and the economies of the region. A significant addition to Singapore's efforts to be a financial hub in Asia, SKBI is a leading institute for academic research with strong industry application and practical dimension in the area of Financial Economics.
The Institute has four major research centres for quantitative financial analysis and offers training programmes for professionals in the financial industry. Its work is conducted in close collaboration with leading scholars in financial economics and financial econometrics from around the world as well as leading international organisations and experts from industry. skbi.smu.edu.sg
About MasterCard Worldwide
MasterCard (NYSE: MA), www.mastercard.com, is a global payments and technology company. It operates the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Cashless Conversations Blog and subscribe for the latest news.
Video News
Programme Director of the SMU Sim Kee Boon Institute for Financial Economics, Dr Aurobindo Ghosh, explained that since growth has come to a halt in many developed countries, including the US and those in the eurozone, modern investors who are looking to protect their wealth choose Singapore as the investment destination in Asia.
Inflation expectations in Singapore eased in December from September amid a weakening global economy, according to a report released on Thursday. The Sim Kee Boon Institute for Financial Economics at SMU and MasterCard Worldwide said that their latest poll showed that consumers in the city-state see inflation at 4.37 per cent in 12 months' time, down from 4.57 per cent when a similar survey was conducted in September.
Singapore's inflation may remain elevated for years to come, according to a survey by SMU where it forecasts an inflation rate of close to 5 per cent in 2017. The online survey was derived from around 400 randomly selected individuals from Singapore households. It was conducted jointly by the Sim Kee Boon Institute for Financial Economics (SKBI) at SMU and MasterCard. SKBI Programme Director Aurobindo Ghosh said: "People are always concerned and they don't always see very clearly what will happen five years later. They will have to rely on media for example, they have to rely on how things are looking, their confidence level. So, we are not going to put too much money into the fact that it is going to be 5 per cent five years later. It might really come down if the conditions actually improve. So, these are perceptions."
Singapore consumers expect inflation to edge down as the global economy weakens, says the latest SKBI-MasterCard Singapore Index of Inflation Expectations report. The report, produced by the Sim Kee Boon Institute for Financial Economics (SKBI) at SMU and sponsored by MasterCard, shows that consumers expect headline inflation of 4.37 per cent this year, down from last September's expectation of 4.57 per cent inflation in the year ahead. This also falls within the official inflation forecast range of 3.5 to 4.5 per cent for 2013. SKBI Programme Director Aurobindo Ghosh and SKBI Director Yu Jun, who developed the index, wrote in their latest report that the index's performance over the past year suggests that inflation expectations in Singapore are quite responsive to policymakers' statements but do not react excessively to short-term fluctuations in food and oil prices.
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