SINGAPORE RATES : The Central Bank Makes Profits

MAS remains profitable !!

“THE Monetary Authority of Singapore (MAS) posted a sharply lower net profit of S$281 million for the year ended March 31, 2015, due to currency effects.
The negative translation effect arose as the Singapore dollar strengthened against the euro and yen by 17.6 per cent and 6.7 per cent respectively, which more than offset translation gains as the Singapore dollar weakened by 8.3 per cent against the US dollar, MAS said in its annual report 2014/15 released on Tuesday.
It posted net profit of S$15.8 billion in 2013/14, aided by foreign-exchange gains.” http://www.businesstimes.com.sg/government-economy/mas-posts-sharply-lower-profit-due-to-currency-effects

Personally, I don’t understand because the SGD NEER clocked about 121.60 on 27 Mar vs 121.40 back in Mar 2014 vs 120.53 for Mar 2013. So profits fell from S$15.8 bio to S$281 mio ?

It is unimportant, I guess. And I say Thank You for turning in a profit on behalf of all Singaporeans, despite currency intervention efforts and keeping those reserves safe.

The big announcements today.

*SINGAPORE GROWTH MOMENTUM WON’T DETERIORATE FURTHER IN 2H: MAS
*SINGAPORE MAINTAINS 2015 CPI FORECAST AT -0.5% TO 0.5%
*SINGAPORE LABOR MARKET REMAINS TIGHT: MAS’S MENON
*SINGAPORE HEADLINE INFLATION SHOULD PICK UP IN 2016: MENON
*SINGAPORE HEADLINE CPI LIKELY TO BE NEGATIVE REST OF YR: MENON
*MAS CURRENT POLICY STANCE REMAINS APPROPRIATE: MENON
*MAS IS `VERY COMFORTABLE’ WITH MONETARY POLICY STANCE: MENON
*SINGAPORE REVIEWING GROWTH FORECAST FOR 2015: MAS’S MENON
*MENON: PREMATURE TO REMOVE ANY PROPERTY COOLING MEASURES (drats !)

SGS TABLE

US LIBOR
1M 0.189
3M 0.295
6M 0.4647

ECONOMIC NEWS AND DATA

MAY Retail Sales +2.4% MoM expected -0.2%
MAY Retail Sales +6.1% YoY expected +3.0%
MAY Retail Sales ex Auto +0.9% previous -0.7%
JUN Non Oil Domestic Exports -2.4% MoM expected -1.2%
JUN Electronics Exports +7.6% YoY expected +2.4%
JUN Non Oil Domestic Exports +4.7% YoY expected +2.0%

The STI is at a 8 week high as the S&P 500 broke another new record and China recovers but we have the USDSGD at a 3 month high as well and likely to remain there as we are warned, as per above, to expect negative inflation for the rest of the year.

STI SGD FOR RESERVES CPI

After last week’s poor GDP showing, it is not a surprise that the outperforming short end bonds sold off ahead of the negative inflation and worries on the USDSGD which would push up SIBOR again ?  Something which I think is a remote possibility repeating what I said last month “I think we have seen the highs for the first half of 2015 with Sibor and SOR to remain nicely contained from here and the SGD to drift within mid NEER. In addition, I believe the markets are better prepared to cope with the new ranges and hear that banks have put in some “measures” to prevent sudden run-ups even if nobody is prepared to bet on lower rates.” https://tradehaven.net/market/singapore-rates-weekly-2-june-2015/

Having said that, we have been seeing some distress in T/N SGD from the over zealous offshore short sellers as usual that is giving market some excitement for the time being.

Yet value investors will have to search very hard to a good reason to invest in Singapore. Yes, I know that SGX has been on a rampage selling SGX blue-chips as the highest yielding dividends in the region at 3.4% vs average 2.3%.

And today the Singapore Savings Bonds have been officially launched with the first auction set to start in Oct. http://www.sgs.gov.sg/savingsbonds/

I think we have entered a new era – the matured Singapore economy era and no one us know what to expect. For once SGS yields have held a sustained positive differential against the UST.

sgs vs ust

I would not hasten to form an opinion or view of how to trade this and as far as I know, there is little interest from most people I know as well and I am still keeping my fingers crossed for some economic stimulus as SG50 nears.

Good luck !