HALISTER1: SINGAPORE RESEARCH ROUNDUP: MAS’s Move Signals Growth Concerns

SINGAPORE RESEARCH ROUNDUP: MAS’s Move Signals Growth Concerns

(Bloomberg) -- Monetary Authority Singapore’s unexpected easing in its monetary stance, suggests concerns over growth and inflation, analysts say in interviews and research notes.
  • MAS shifted to a neutral stance of zero appreciation in Singapore dollar: statement; says width of policy band and the level at which it is centered will be unchanged
  • Singapore dollar slides 0.8% to 1.3615 per U.S. dollar, set for largest drop since Jan. 4; 2-year interest-rate swap jumps 9 bps to 1.6100%, poised for biggest increase since Feb. 12; 2-year govt bond yield rises 7 bps to 1.00%
  • Westpac (Sean Callow, senior currency strategist)
    • This surprise move indicates a gloomy outlook for regional trade; MAS is now more downbeat on outlook for both growth and inflation
    • As one of the world’s most trade-sensitive economies, Singapore’s concern over a “less favourable external environment” should be noted by the likes of RBA and RBNZ
  • ANZ (Weiwen Ng, economist)
    • Singapore is leveraging on twin policy levers -- fiscal and exchange rate -- to address potential downside risks to growth and inflation as well as a deteriorating labor market
    • MAS’s easing in stance to neutral leaves door open for re-centering of policy band later in the year if conditions warrant
    • There’s also room for off-budget measures at a later stage to address any potential economic shocks
  • Nomura (Craig Chan and other strategists, economists)
    • Given MAS’s move to zero appreciation stance, Nomura expects flattening pressure to continue in yield curve
    • Continues to believe higher term-funding rates are new norm in Singapore
    • Expects rates to come under upward pressure as market prices out FX carry gains; this should also cause SGD rates to underperform USD rates
  • Bank of Singapore (Sim Moh Siong, FX strategist)
    • Today’s move represents easing but MAS is careful to maintain that this isn’t a policy to depreciate local currency
    • Right now, zero slope means MAS wants Singapore dollar to be stable vs basket of currencies; however, market will take this as a signal of easing and there’s room for Singapore dollar to fall to weak side of band
  • ABN Amro (Roy Teo, senior FX strategist)
    • MAS’s decision is in line with ABN Amro’s view that strong gains in S$NEER will pose headwinds to exports and inflation outlook
    • Forecasts USD/SGD at 1.4000 for year-end
  • DBS (Philip Wee, senior currency economist)
    • There’s been a deterioration of economic conditions since MAS’s last meeting; if things have already worsened, why wait for October to ease?
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Weiwen Ng (Australia & New Zealand Banking Group Ltd)
Craig Chan (Nomura Holdings Inc)
Moh Sim (ING Groep NV)
Philip Wee (DBS Group Holdings Ltd)
Roy Teo (ABN AMRO Group NV)

To de-activate this alert, click here

UUID: 7947283