The world heated over in July into uncharted climate territory this month. Collectively, we registered the hottest day on record globally on July 6, and as I write, fires rage in Greece, where temperatures hit above 40 degrees Celsius. June was the hottest month ever on record, with the thermometer showing 1.47 degrees above typical June weather during the pre-industrial period.
Average ocean temperatures are beating the high of 2016, and never have we had a marine “beyond extreme” heatwave in the North Atlantic 4 to 5 degrees above average. This corresponds with a record low in Atlantic sea ice, an area 10 times the size of the UK that has gone missing, compared with the 30-year average to 2010, according to The Economist.
It is not conclusive whether this “new era” would lead to “climate collapse” or “runaway warming”, but certainly, new trends and patterns seem to be forming, just like economic data of still rising inflation alongside persistent strong employment numbers in the West, which is keeping policymakers trigger happy for more rate rises.
The Tempest
In July, this column argued that while gig jobs may contribute to positive employment figures, they alone cannot ensure a sustainable and robust global economy. Recent developments have begun to validate this viewpoint, as there has been a noticeable decline in consumer demand. This can be observed in the export figures from China to Singapore and the profit warnings issued by various global tech companies and manufacturers of white goods.
Reading tea leaves from upstream companies indicate full inventories, as the restocking cycle for Thanksgiving and Christmas, which typically starts in July, remains thin. This suggests a potentially frosty Winter’s Tale.
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Chinese equity markets have continued to drift into the doldrums along with its sputtering economy, no matter whether it is Bill Gates, Janet Yellen or 100-year-old Henry Kissinger going to Beijing and getting an audience with Chinese President Xi Jinping.
Meanwhile, the rest of the world — led by the Magnificent Seven stocks in the S&P in the US — seems to be anticipating the old “Goldilocks” (not too hot and not too cold) outcome of a Fed-engineered soft landing in the US, with two more anticipated rate rises. In the meantime, UK households’ discretionary spending has collapsed due to rising food, energy and mortgage expenses.
A friend from junior college who now works in London as a lawyer visited recently. Together with her husband, a doctor, they could still service their monthly mortgage, which shot up recently to GBP2,300 ($3,936) from GBP500 because it is tied to a variable rate.
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This is not a luxury that could be afforded to the majority. We have seen the impact on US commercial real estate with Manulife US REIT recently busting its 60% debt ratio for lenders’ covenants. Hong Kong’s real estate bid-offers are still wide, given how rental renewals are declining through 2023.
If household wealth is overrepresented by real estate deflates, it could suck out business and consumer dynamism from Western economies. The current travails in China — even if Dalian Wanda seemed to have survived the latest bond payment without defaulting last week — had experts suggest that China will follow in the footsteps of 30-year Japanese deflation. The jury is still out if All’s Well that Ends Well. For now, the dream for world peace, non-partisan US politics, and a China-US détente focused on saving the planet still eludes us.
Much Ado About Nothing
Don’t get me wrong. Some inflation is good. Japan, our dark horse for 2023, postulated in this year’s first column, continues its economic and market ride up, as 3% to 5% inflation after three decades in a deflationary trap is now engendering a virtuous cycle of domestic consumer confidence and international investment. Runaway inflation, such as what’s happening in the UK, possibly compounded by an unacknowledged Brexit impact and a bad recent Tory government, is not.
Still, well-managed Singapore had managed to stave off extreme inflationary ills with a steadily appreciating SGD (now performing better than the mighty USD that trumped all currencies last year), reducing some import cost-push.
On July 22, the Fairprice Group marked its 50th anniversary — with its history captured in a commemorative book by Sue-Ann Chia and Peh Shing Huei called The Price of Being Fair. The supermarket chain was founded in 1973 amid the first oil shock and has, throughout the years, maintained its mission of helping Singapore exert some control on retail profiteering amid a global inflationary crisis, keeping essentials — including the infamous toilet papers during the early days of the pandemic — readily available.
Perhaps that may be why the unexciting Straits Times Index continues to purr ahead Goldilocks-like. Those who bought the July dip closer to 3,100 points would have again got a 3,280 exit already. I got lucky with activating my CPFIS for the STI ETF early in July and couldn’t resist taking 5% off the table a few days later.
This time, the banks led the rise, with a trail of this column’s favourites Sembcorp Industries, Keppel Corp and Seatrium rallying back from 10%-15% pullbacks. It has been a profitable ride for those less distracted here by hot mics, public “affairs”, and allegedly F1 shenanigans involving the Corrupt Practices Investigation Bureau (CPIB).
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The market continues not to excite but allow nice kung fu (See Chew On This, Feb 2) extraction of tradable ranges on good well-managed companies. Should there be a pullback through August and September, and if Western markets start pricing a more serious recession, it could create another buying dip.
This time I will look out for entry into consumer staples, including Wilmar International and Thai Beverage, or laggard tech, such as Venture Corp, which has dropped back to the lower end of its recent range. It may yet double bottom in the mid $14s as the chartist will describe — and hopefully, it would not be Love Labour’s Lost.
Measure for Measure
At last week’s NCSS Social Service Summit, participants were treated to speakers, including Ho Kwon Ping of Banyan Tree and Chatri Sityodtong of One Championship, sharing their thoughtful and passionate views of corporate purpose with the social sector.
Using the hospitality industry example, Ho highlighted that the corporate rigour on productivity and profit and the social service focus on people-centred news and values were two sides of the same coin. An organisation with many metrics without values and clarity of mission may lose its soul and may be less attractive in the war for talent in today’s world as employees look for meaning alongside pay.
For instance, that narrative can be found in DBS Bank’s roots in developing Singapore’s economy or Singapore Airlines, enabling Singapore’s existential logistics to be revalidated during the pandemic.
Social service agencies built on values without metrics to articulate output, outcome and create alignment with potential funders will find it harder and harder to get funding and resources from a corporate sector. After all, every individual’s pet cause intrinsically is valuable, but unless effectively tied to how it can enable a corporation to express its “S” in ESG (environmental, social, and corporate governance), it is one of an inexhaustible pool of competing claims on limited CSR (corporate social responsibility) resources.
As You Like It
Simply put, “corporates build a house, but purpose-driven organisations build a home”. The two worlds are not so far apart, but these bridges must be built for a sustainable society to thrive.
Fairprice Group, referred to above, with over one million digitally connected consumers, continues to innovate and be more efficient in engagement and effective in servicing its core goal of moderating the cost of living in Singapore. Income Insurance (where I am on the board), its cousin, has a 93% offer rate for seniors providing inclusive access.
NCSS has announced its launch next year of a new Sustainable Philanthropy Framework (in partnership with NVPC) to help companies shape, track and measure the social impact of their ESG efforts. An enabling ecosystem, where it’s not just companies donating money per se to assuage their own “guilt” — and potentially stand accused of green or whitewashing — but where it’s thoughtfully embedded with purpose internally or in partnership with social service organisations, would help build a sustainable Forward Singapore society.
Here are some good examples. CDL’s Millennium Hotels and Resorts had incorporated Community Chest’s “Change for Charity’’ sustainable philanthropy programme launched this year across different consumer touchpoints, enabling its customers to give through them.
They have uniquely combined the “E” and the “S”, where if the consumer saves the planet by electing not to change sheets and towels daily, CDL will donate $10 of the cost saved. This is indeed holistic, responsible hospitality. As a leader amongst listed companies, they are constantly ranked and included in ESG indices attracting additional sustainable capital.
Last week, Sunlife launched its new SunBrilliance Indexed Universal Life policy, which embeds a giving mechanism where up to 0.5% of the policy premiums with a cap of US$20,000 ($26,610) per policy will also go towards supporting communities in greatest need in Singapore to achieve their full potential. Local brokerages CGS-CIMB Securities, where you click to donate a dollar when you trade, and Phillip Securities, which facilitates the donation of rewards points on its pioneering internet platform, POEMS, are leading the way.
MSIG enables donations at checkout for premium payments on digital platforms, similar to what’s available on AXS payment machines, whilst Eu Yan Sang has a QR code for offline in-store transactions for customers to donate — as you like it. For the professional community, ISCA will donate $1 to Community Chest for every new subscription via the ISCAccountify e-learning app.
The world may still come to a boil with climate change moving ahead of net zero commitments by governments and companies being implemented. But suppose the corporate sector acts less like the Merchant of Venice and embeds purpose into its practices, enabling its customers and stakeholders to give through their transactional touchpoints without taxing the limited CSR pocket in an uncertain business environment.
In that case, it may find that doing good is good for business. That would indeed be a dream come true amid the sweltering midsummer.
Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange, and he was awarded FOW’s lifetime achievement award. He serves as chairman of the Community Chest Singapore
