The wake of the fiscal crisis in the twelvemonth 2008 has adversely affected the economic systems in the universe ; doing liquidness in the recognition markets to dry up and finally resulted in many fiscal establishments confronting insolvency issues. Businesss around the universe faced tough times in acquiring financess as Bankss became conservative in loaning. Fiscal governments around the universe therefore took steps in a command to command the broad spread of the crisis to cut down the impacts. Singapore was non spared in the crisis excessively and now sees monolithic financess, pecuniary policies and financial programs being implemented to ease the state of affairs.
In 2009, Singapore ‘s GDP decreased by 7.5 % from a growing rate of 21.7 % in the post-crisis bounciness Q2 to 14.2 % in Q3. However, there were increasing marks of recovery in Q3, demoing an enlargement of all sectors in the economic system. This reflected a better-than-expected result for Singapore ‘s GDP growing prognosis for 2009 and has been revised upwards to between -2.5 % and -2 % , from -6 % to -4 % . The lessening in unemployment rate from 3.1 % in 2005 to 2.2 % in 2008 as shown in Appendix Table 2.1 besides signals that the Singapore economic system is retrieving from economic lag.
1.2 Critical Variables impacting Singapore economic system
We have identified several critical variables that have important impact on the Singapore economic system. They are viz. , the pecuniary policy, financial policy, and external trades.
1.2.1 Monetary Policy
One of the cardinal enterprise of MAS ‘ to ease the economic system is following pecuniary policy works through pull stringsing the exchange rate to act upon the economic system to accomplish low rising prices and sustainable growing, taking into consideration the fact that the nature of Singapore ‘s economic system is strongly correlated because of the economic system ‘s trust on exports and the city-state imports virtually all of its demands which will be covered in subdivision 1.2.5 Singapore Export. This resulted in MAS trusting on the currency instead than its involvement rate as its policy tool.
Presently, MAS has abandoned its strong currency scheme in which it has implemented since April 2004 and has maintained its loose pecuniary policy ‘zero per cent grasp ‘ for the Sing dollar despite a modest recovery from recession since 2002 ( CNA, 2009a ) . The maintaining of its relaxed pecuniary policy of ‘zero per cent grasp ‘ of the S $ SNEER policy set came approximately on October 10, 2009 ( Bloomberg, 2009 ) . This new policy is a complete U-turn of MAS ‘ stance when MAS called for a quicker exchange-rate grasp to muffle rising prices six months ago. Strengthening the Sing dollar, which has been adopted by MAS since April 2004, is a move to chasten the increasing rising prices as Singapore ‘s one-year rising prices rate has moved up to 7.5 % in a new 26-year record high ( CNA, 2009b ) . However, rising prices for the approaching twelvemonth is expected to fall with the addition in trade good monetary values.
Although MAS Monetary Policy Statement does non province the ground for the new policy except that the economic system is deteriorating and rising prices is on the rise quickly, we analyze that the new policy will assist Singapore exporters in the long tally, and this will be covered under subdivision 1.2.5 Singapore Export. This will promote a strong growing recovery in the approaching twelvemonth and we foresee that the Singapore economic system will be favourable to investing despite the glooming universe economic system arising from US recession. This is due to the fact that Singapore does non trust merely on US but other merchandising spouses from other states.
1.2.2 Fiscal Policy
On the financial forepart, the authorities has been antiphonal to the evolving challenges facing the Singapore economic system and has enforced it full force. Subsequently, with the oncoming of the planetary fiscal crisis and recognition crunch, the authorities announced a $ 2.3 billion bundle towards the terminal of 2008 to loosen recognition lines and assist local concerns gain entree to loans ( MAS, 2009 ) .
In position of the quickly deteriorating economic environment, a $ 20.5 billion ( 8.2 % of GDP ) resiliency bundle was delivered to salvage occupations, to turn to structural challenges, aid feasible companies stay afloat and heighten the economic system ‘s long-run capablenesss. For case, the corporate income revenue enhancement rate will be reduced from 18 % to 17 % , get downing from YA2010, to hike fight and pull investing to spur occupation creative activity. In add-on, the authorities is besides pressing in front with long-run investings in substructure, instruction and health care to do Singapore a first metropolis. Therefore with these policies implemented, growing rate for Singapore economic system is expected to lift farther in 2010 ( IRAS, 2009 ) .
Inflation occurs when demand exceeds supply, doing monetary values of goods and services to lift. Over the old ages, the Singapore ‘s rising prices rate has been on a rise from 0.5 % in 2005 to 6.5 % in 2008 which is in line with the consumer monetary value index ( CPI1 ) which besides raised from 100.4 in 2005 to 110.3 in 2008 as shown in Appendix Table 1.4 ( Government of Singapore, 2009 ) . The rise in rising prices is chiefly driven by higher nutrient and conveyance costs in Singapore. This leads to slower growing of the money supply in the economic system every bit good as higher involvement rate are charged for borrowing money. Monetary Authority of Singapore ( MAS ) has late announced that its rising prices prognosis for 2010 to be between 2.5 and 3.5 per cent as a inundation of foreign investing raises asset-bubble concerns ( JakartaGlobe, 2009 ) . A autumn in rising prices agencies that the overall monetary value degree of goods will diminish and that consumer buying power will raise, imitating consumer disbursement every bit good as the economic system.
1.2.4 External Factors
The mentality of Singapore ‘s economic system is closely linked to planetary conditions which is the international trade public presentation. In other words, positive planetary economic developments would propose a healthy economic system in Singapore. Singapore ‘s consumer monetary value index ( CPI1 ) is driven by external factors such as oil and nutrient trade good monetary values which is determined by the growing of the universe markets. Emerging market economic systems, particularly in Asia, continue to retrieve strongly. For case, Indonesia, Singapore ‘s 4th largest trading spouse, with bilateral trade valued at S $ 75.1 billion saw a rise of 13 per cent from 2007 ( Borhan. H. , 2009 ) . In add-on, private-sector economic experts presently expect the US economic system to spread out by 2.7 % in 2010, from a projected -2.4 % this twelvemonth, adding further to the bright mentality of the export markets.
1.3 Forecast for Singapore Economy
We expect that the growing in the first and 2nd quarters in 2010 is likely to be moderated, taking in the fact that exportation is expected to stay down. However, in the 3rd one-fourth onwards, we analyse that the economic system will switch towards positive as a consequence of the stimulative policies implemented by the authoritiess of its trading spouses. The Singapore economic system will therefore sit on this moving ridge of economic recovery and patterned advance. In add-on to this is the fact that MAS will go on to be argus-eyed over the advancement of the economic system and has implemented a series of policies.
With the continued execution of the S $ SNEER policy, it will further beef up Singapore ‘s export markets, promoting an addition in its export rates due to cheaper goods from Singapore. Furthermore, the resiliency bundle which the authorities delivered will go on to harvest positive effects in the economic system as more companies are able to surge through this tough period, salvaging occupations and increasing employment rate in the procedure.
2. Industry Analysis
2.1 Overview of Singapore Info Communication Industry
We have selected info communicating industry as the industry suitable for investing. Over the old ages, the infocomm industry has greatly enhanced Singapore ‘s fight by raising productiveness and transforming concern procedures.
2.1.1 Defensive Industry
We have indentified infocomm industry as a defensive industry. Telecommunication and cyberspace services are an built-in portion of concern operation and will still be required even in times of recession. The info communicating industry plays an of import and indispensable function that supports the Singapore economic system to map as a major communicating hub. As such, our selected industry will appeal to investors as defensive industries as the values of these stocks are by and large maintained during economic downswing.
2.1.2 Market Structures – Oligopoly
The Singapore infocomm industry was liberalized in April 2000 by IDA to advance competition among bing participants and create chances for new market entrants. Following that, large companies like StarHub and M1 were awarded licences to put up telecommunications operations in Singapore ( IDA, 2000 ) . This leads to a passage of the market construction from monopoly antecedently dominated by SingTel to oligopoly.
Singapore ‘s Info-communication industry is dominated by three major companies viz. , SingTel, MobileOne ( M1 ) and StarHub. Currently, SingTel holds the figure one place with a 46.4 % market portion. StarHub came in 2nd with 27.9 % market portion while MobileOne stands 3rd with 25.7 % market portion as of 2008 ( IR Market Research Corp, 2009 ) . Since a big per centum of the market is taken up by these houses, they tend to collaborate with each other by maintaining their monetary values competitory to take full advantage of the net incomes in the industry.
2.1.3 Past Gross saless and Net incomes Performance
Singapore ‘s info communicating industry is one of the cardinal subscribers to the Singapore economic system. From Appendix Chart 2.2, we infer that the overall infocomm industry experienced a phase of changeless growing during the period of 2004-2008. The gross of the industry has been invariably increasing from $ 34.77 billion in 2004 to $ 58.10 billion in 2008. This represents an overall growing of 40.2 per cent ( IDA, 2008a ) . Based on the tendency given in Appendix Chart 2.2, we infer that the infocomm sector has past the rapid acceleration growing and presently in the phase between mature growing and stablisation & A ; market adulthood. The public are now familiar with the industry, net income border continues to turn and begins to brace as shown in past three old ages public presentation.
The Info communicating industry in Singapore relies on both the domestic and export markets. Since the domestic market is limited to Singapore, major companies in the sector such as SingTel have expanded its concern to overseas. In 2008, the 61 % of Singapore ‘s infocomm entire gross was contributed by export composing ( IDA, 2008c ) . Based on the one-year study of info communicating industry 2008, Singapore ‘s infocomm export experienced a changeless growing rate of 77.6 % from 2004 ( $ 19.86 billion ) to 2008 ( $ 35.28 billion ) as shown in Appendix Chart 2.4. While Singapore ‘s infocomm domestic experienced an overall grow of 53.1 % from 2004 ( $ 14.91 billion ) to 2008 ( $ 22.82 billion ) and strong growing of 25.9 % from 2007 ( $ 18.13 billion ) to 2008 ( $ 22.82 billion ) as shown in Appendix Chart 2.5 ( IDA, 2008c ) .
2.2 Government Initiatives towards Info Communication Industry
Singapore ‘s authorities support plays an of import function in the growing of the infocomm industry. Over the old ages, IDA has been continuously working on making demand and chances to heighten competition and sustain growing in the infocomm industry through short and average term policies, ordinances and guidelines. For case, IDA has been working on programmes such as the Overseas Development Programme to help local infocomm companies in spread outing into international markets through join forcesing with major local infocomm companies ( IDA, 2009a ) . Singapore export infocomm has been a cardinal subscriber to the overall growing of the industry. In 2008, 61 % of Singapore ‘s Infocomm entire gross was generated by the export sector ( IDA, 2008c ) .
On top of that, the authorities has late developed a go-to-market scheme to speed up market entree and expand concern chances through selling merchandises and services offered by local infocomm companies to possible foreign clients through abroad tradeshows and seminars ( IDA, 2009d ) . This would assist advance the Infocomm industry, make more abroad concern chances every bit good as increasing the net income borders of Singapore Infocomm exports in the undermentioned fiscal twelvemonth.
As for domestic of infocomm, the authorities will be puting S $ 1.73 billion on the infocomm industry to run into the demand of concerns and citizens through increasing concern efficiency ( IDA, 2009c ) . To advance effectual competition, IDA has besides late released new consultative guidelines which obligates major nomadic operators such as SingTel, StarHub and M1 to discontinue the fixed early expiration charges on clients who sign on nomadic contracts for no longer than three months and terminate before the terminal of their contract with consequence on 1 March 2010. This would intend higher competition between houses in the approaching twelvemonth which would help in the growing of the industry ( IDA, 2009e ) .
2.3 Porter ‘s Competitive Forces Model
2.3.1 Rivalry among Existing Firms
The lifting demand for nomadic & A ; broadband services has attributed to the stronger competition between the three major operators – SingTel, StarHub and MobileOne. Rivals are now supplying higher quality and value-added services at more attractive monetary values. For case, SingTel is offering the all-in-one Mio Home bundles that include broadband Internet entree, place fixed line and Mio Television at an attractive monetary value. In add-on, SingTel and M1 are besides offering wagess such as monthly measure rebates to advance trueness from bing endorsers and new phone set at attractive monetary values to pull new clients. Besides that, they are besides offering full nomadic figure portability services to let endorsers to retain their bing phone figure even if they switch to another service supplier. As such, the competition between these companies would farther drive the infocomm industry.
2.3.2 Bargaining Power of Customers
Since Singapore Infocomm sector are dominated by SingTel, StarHub and M1, clients will hold to accept the service programs offered by these companies. As such, clients in the telecommunication industry have small bargaining power since the monetary value of merchandises and services are chiefly determined by these companies and. For illustration, clients who wish to purchase an iphone would necessitate to subscribe to 3G informations programs and pay a fixed monetary value program set by the nomadic supplier. Thus, even if there is a monetary value cut, it is most likely caused by competition within the industry instead than clients dickering power ( MSN, 2009 ) . As such, major infocomm companies have the ability to act upon the market monetary value of their merchandises and services while maintaining monetary values competitory to take full advantage of the net income border therefore doing the industry attractive to put.
2.3.3 Bargaining Power of Supplier
The providers of the major infocomm companies are recognised as holding strong bargaining power over the industry. For case, the providers of StarHub ‘s Max Cable Television are chiefly contents suppliers such as Cartoon Network, HBO, etc and French telephones providers such as Nokia, Sony Ericsson, etc. With the recent acquisition of the distribution rights of Apple iPhone, Apple Inc would go the new provider of StarHub. These providers have high power in exerting the monetary value and quality of the merchandise. For illustration, in order to air a peculiar channel on Max Cable Television, StarHub would necessitate to pay a monetary value set by the channel suppliers.
2.3.4 Threat of New Entrants
The ownership of a telecom licence can stand for a immense barrier to entry. Singapore infocomm industry of was liberalized in April 2000 by the authorities with the nonsubjective to increased competition among bing participants and to make chances for new market entrants. However, since most citizens already own at least one Mobile phone and tied to their service programs, it would be hard for new entrant to perforate into the market as they would necessitate to come out with a big amount of money for set up every bit good as to vie with bing rivals in monetary value, quality and services. As such, the menace of new entrant to major participants such as SingTel and StarHub is low ( Point-Topic, 2009 ) .
2.3.5 Menace of Substitute Products or Servicess
Our squad infer that there are presently no stopping point replacements in other industry since the Singapore infocomm industry is invariably maintaining up with new engineering and substructure it would be difficult for other industries to come out with replacement merchandises or services. As such, the menace of replacement merchandises or services to the major infocomm companies is besides minimum.
2.4 Forecast for Info Communication Industry
It is expected that the info communicating industry will keep its public presentation in this economic lag. The defensive industry as a whole remains stable and continues to turn even at times of economic lag which is an appealing pick for investor. Thus we have evidences to believe that gross for infocomm industry will prolong and that the industry will accomplish a stronger grow to be in line or even travel beyond the forecasted growing of the general economic system for 2010 ( IDA, 2008a ) .
3. Company Analysis
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