Thursday, February 10, 2011

New Ang Pao Index to Track Market Cycle

SINGAPORE -- That little red packet (ang pao) you get at Chinese New Year might soon become the greatest indicator of the country's market situation.

The Ministry of Finance revealed today that it is considering using a new Ang Pao Index (API) to track the peaks and troughs of the economic cycle. The index measures the average amount of money given in red packets during Chinese New Year to determine the state of the economy.

"The system is actually very simple," said Ms Vivian Tay, a spokesperson for the Ministry, at a press conference yesterday. "Giving eight to ten dollars is around the average during a healthy economy. Six to eight means that there is currently an economic downturn. Receiving an ang pao with only four to six dollars means that we are currently in a recession."

When asked what receiving less than four dollars meant, Ms Tay said she had no comment, but was heard muttering the words "Lehman Brothers" and "bailouts".

Red packets, or "ang paos" as they are more commonly known, contain a small amount of money, and are traditionally given from married couples to unmarried family members during Chinese New Year. The red colour of the envelope represents good luck and is supposed to ward off evil spirits, while the small amount of money represents good fortune and wealth.

Many economists are praising the new index for its simplicity. "We used to have to take note if there suddenly was two months of negative economic growth," said Mr Tan Poh Cheng, an economic analyst. "Now we just wait for Chinese New Year to come around, and the results will already be there for us."

"It also grants us a perspective of the economic situation from the eyes of the people," said Ms Chan Ong Hui, who works in the Ministry of Finance. "If we know that the general population is feeling the economic crunch, we will better understand how to help them through the difficult time."

Critics, however, have quickly pointed out many flaws in the new index. "There is no proven economic link between red packet donations and the market cycle," said Mr Valkrishna Gunselagaam, a financial investor. He added, "Even Steven Levitt wouldn't be able to do it," referring to the unorthodox American economist who uses economic concepts to challenge conventional wisdom.

Dr. Tiffany Lim, economic professor at the Singapore Institute of Management (SIM), also stated that the cultural tradition might not be elastic enough to be affected by recession.

"Singaporeans are too scared to 'lose face'," said Dr. Lim, "and are also profoundly superstitious. For these reasons, it is highly unlikely that they would give less during a recession, even if they are shorter on disposable income."

Nevertheless, the Ministry of Finance has already begun looking at using the sampul hijau, or green envelopes in Malay, the adaptation of the red packets given during Hari Raya Adilfitri, to provide extra evidence to support the API.


Inspired by a status I saw on Facebook.

Xing Nian Kuai Le!
The Edna Man

No comments: