The Monetary Authority of Singapore (MAS) recorded an overall loss of S$7.4 billion ($5.3 billion) for the financial year that ended on March 31, citing lower investment gains, currency appreciation, and higher interest expenses.
Investment gains were S$4 billion, down from S$22.8 billion from the last financial year. In addition, the appreciation of the Singapore Dollar led to a negative foreign exchange translation effect of S$8.7 billion, the regulator announced in its annual report on Tuesday (July 19).
The Singapore Dollar strengthened 4% against the Pound Sterling, 5% against the Euro, and 9% against the Japanese Yen, it said.
Additionally, total expenditure increased to S$2.8 billion, attributed to higher interest expenses on domestic money market operations.
The overall loss marks the central bank's first in nine years, according to the Straits Times.
The MAS is one of three investment entities that manage the Singapore government’s reserves. The other two are state investment firm Temasek, which posted a 5.81% return for the financial year ended March 31 with a net portfolio value of S$403 billion ($297 billion), and sovereign wealth fund GIC, which does not publish its assets under management.
However, the losses should not be a major cause for concern, according to Diego Lopez, founder of sovereign wealth fund research house Global SWF.
“As you know, MAS has today around S$628.1 billion in assets, so a net loss of S$7.4 billion (-1.1% RoA) does not sound excessive when put in the global context and understanding the foreign exchange effect,” he told AsianInvestor.
“Unlike Temasek, which has the benefit of having an illiquid portfolio, MAS is very much affected by interest rates and the stock markets, which are not faring well at the moment.”
He added that MAS’ balance sheet had been reduced by transferring S$75 billion to GIC, with the total number planned to be transferred amounting to S$185 billion. These transfers can help stem the losses, but in the short-term, losses are likely to continue in the face of inflation, interest rates and stock market movements, he said.
As for the possible impact on Singapore’s asset management industry, he said: “There may be a switch of focus from public markets to private markets, but Singapore's asset management industry will surely continue to shine.”
The MAS also said that the economy is on track to reach the lower half of the 3-5% GDP growth forecast and that growth momentum had slowed. GDP growth was at 4.4% in the first half of the year and the economy is currently 6% above its pre-pandemic levels.
The central bank also said that it will release its annual sustainability report next week, which will provide a detailed account of initiatives aimed at strengthening the financial sector’s resilience to climate risk, building a climate-resilient portfolio and reducing MAS’ carbon footprint with greenhouse gas emissions reduction targets by 2030.
Singapore’s financial sector grew by 7.4%, and fintech investments reached a record high of $3.9 billion. A total of 4300 net jobs were created in financial services and the fintech industry.
On cryptocurrencies, the MAS reiterated caution against retail investments and said it plans to consult on proposed consumer protection and market conduct measures in the next few months.
“The crypto industry globally is still evolving and regulation is still catching up with industry trends,” managing director Ravi Menon said. “Most regulatory regimes today do not cover areas such as consumer protection, market conduct, and reserve backing for stablecoins. This is changing. Reviews and public consultations are underway, among international standard-setting bodies and regulators, to strengthen regulation in these areas.”
On inflation, Menon acknowledged that it was a concern among Singaporeans and that labour market tightness is the key source of inflation pressures in most advanced economies.
Singapore has lost 15% of its non-resident workforce since December 2019, and job vacancies are at record high levels across sectors, he said. Resident wages have risen by an average 6.2% year-on-year over the past three quarters, running slightly ahead of real productivity growth of 5.5%.