Why diverting investments to stocks could curb property bubbles

2 possible tweaks could be made.

According to CIMB, investment diversion to stocks could be a useful means to control property bubbles.

For policy-making perspective, Singapore policymakers could consider a hike in the maximum investment limits under CPFIS to divert some of the excess local liquidity away from property.

Here's more from CIMB:

Plausible tweaks to the rules include: 1) allowing the more successful investors to commit a larger portion of their CPFIS to equity investments, or 2) to calculate ‘investible savings’ on a mark-to-market basis of prior investments are all feasible.

The US is talking about tapering, not a raising of short-term interest rates. If short-term rates stay low and a negative real rate environment in Asia prevails, releasing the valve of liquidity away from property (by opening it to equities) might be a useful way of curbing the instinct to buy property.

From SGX’s perspective, applying to policymakers to allow retail investors the ability to use a greater portion of their pension fund assets for equity investments also makes sense. It will complement recent initiatives to spur retail activity in the Singapore stock market.

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