Singapore Market Developments & Implications


Heavy week with heavy repercussions on the domestic front.

We started with a bang and a resounding 2Q GDP but forecasts of a slowdown going ahead.

“·         MTI forecast raised to 2.5-3.5%, implying slower 2H sequential growth
rates — Forward-looking indicators point to a slowdown in the pace of
sequential growth in 3Q: [1] Composite Leading indicator – which leads GDP by
one quarter – slowed but remained in expansion at 1.0%QoQ annualised (1Q:
1.7%); [2] EDB’s Survey of Business Expectations for Biomedicals Output shows
that a net weighted balance of 9% of biomedicals manufacturers expect output
levels to fall in 3Q. Assuming similar sequential growth rates for each
remaining quarter of 2013, we estimate the upper bound of MTI’s forecast of
2.5-3.5% for 2013 already implies on average 0%QoQ SAAR growth while the lower
bound implies average sequential decline of 5%. 3% growth would be consistent
with 2.5%QoQ SAAR declines on average in 2H13.” Source : Citibank

Parliamentary Questions On The State Of The Economy

By Sharon Chen
Aug. 12 (Bloomberg) — Monetary Authority of Singapore
board member Lawrence Wong speaks in Parliament.
• Singapore’s household balance sheets on the whole “in good shape”: Wong
• Most borrowers with debt of more than 60% of income have above-average income: Wong
• MAS will continue to encourage prudence in lending and borrowing: Wong
• Household balance sheets are ‘‘resilient’’ at aggregate level: Wong
• MAS continues to ‘‘watch the market’’ closely: Wong
• NOTE: Singapore Says 5%-10% of Households Could Be Over-Leveraged
• NOTE: Singapore Cuts Trade Outlook as China Slowdown Caps Recovery

In a Straits Times article, MAS Director Lawrence Wong noted that 5-10% of mortgage holders have monthly debt servicing ratios of >60% and a rise in interest rates will cause this group of borrowers some difficulty but they are better off than the general Singaporean household.

Some data revealed by MAS last week and other data.

  • total credit to GDP 270%
  • total residents credit to GDP 155%
  • housing loans to GDP 46%
  • 49,000 borrowers have at least 2 outstanding mortgage loans approx 10% of total (Credit Bureau Singapore)
  • average outstanding loan for the age group >55 y.o. (for those with loans) is SGD 605k (Credit Bureau Singapore)

The key takeaway is ” The combination of low interest rates, growing leverage, and surging property prices poses significant risks to financial stability – hence MAS’ concern.”

Other Headlines

  • Singapore Private Home Price Increase Slows to 1.6% in 1H
  • 27% plunge in car sales spoils retail landscape
  • Singapore July Home Sales Drop to Lowest Since December 2009
  • Responding to feedback from Singaporeans that some
    companies are choosing to give jobs to foreigners over locals,
    Deputy Prime Minister Tharman Shanmugaratnam and Acting Minister
    of Manpower Tan Chuan-Jin met with senior management in a number
    of financial institutions to emphasize that they should make a
    concerted effort to develop a local talent pipeline, Tan said in
    Parliament in March. Source : Bloomberg
  • Jul Non Oil Domestic Exports Decline in Jul Hints at 3Q GDP Pullback



It does not appear that we should expect a protracted slowdown though. The outlook is decent and employment picture looks rosy, in fact.

”     An estimated 58.4 percent of Singapore’s population will be
employed in 2014 compared with 49.5 percent in 2004, the largest
increase among the 33 markets, according to an analysis by
Bloomberg Rankings. The study divided the number of working
people in each country by its population, based on data from the
International Monetary Fund.” Bloomberg

Don’t ask me where the jobs are coming from.


”     Aug. 16 (Bloomberg) — Yield gains to 2.47% as of 11:49am
in Singapore, poised for highest close since Aug. 2, from 2.43%
yday, according to data compiled by Bloomberg and Monetary
Authority of Singapore.

• Singapore’s currency weakens 0.1% to S$1.2701 per dollar”

MAS just sent out a white paper.

”     Aug. 16 (Bloomberg) — To conduct impact study for all
banks, merchant banks and finance companies in Singapore
regarding implementation of Liquidity Coverage Ratio (LCR) of
Basel III Liquidity Rule, according to a consultation paper on
MAS website.
• MAS study based on June 28 positions
• MAS proposing to replace existing MLA framework with LCR framework for all banks and finance companies; new framework will also be extended to merchant banks
• Singapore will adopt Basel’s recommended implementation timeline”

Outlook for Monetary Policy

The possibility of monetary easing in Oct is starting to dim. That should, in Singapore’s case, give the bond holders some breathing space and time to cheer. Because monetary easing spells higher rates in our case.

With the recent change in management in MAS and the unpredictability of the global economic landscape, the case for a wait and watch approach is increasingly each day.

At this moment, we have the INR at a new record high vs the USD, again. And MYR continues to lag. EM weakness will drag the USDSGD higher, but is likely to be neutral on the SGD NEER.