Opening Remarks By Mr Heng Swee
Keat, Managing Director, at MAS' Annual Report 2004/2005 Press
Conference, 22 July 2005
1. Good morning. Let me share with you a quick overview of
current economic conditions before I move on to talk about
highlights of the financial sector's growth and other aspects of
Economic Conditions And Outlook
2. Supported by buoyant global economic conditions, the Singapore
economy grew by a robust 8.4 percent in 2004, with broad-based
growth across all major sectors.
3. The global economy is expected to grow at a more moderate pace
this year, but it will remain supportive for the Singapore
economy. Although our GDP growth slowed in the first quarter of
2005, this largely reflected fluctuations in the biomedical sector.
4. Overall, the economic outlook remains positive. The latest
advance estimates show that growth picked up in the second quarter
of 2005. Real GDP expanded by 3.9%, with the growth momentum
rebounding strongly, coming from both the manufacturing and services
sectors. The underlying growth support for our economy remains
intact, and barring unforeseen shocks, activity in the second half
of the year will be sustained. The Singapore economy is forecast to
grow by between 2.5% and 4.5% in 2005.
5. Although headline inflation is low, we remain vigilant of
inflation pressures over the medium-term. The economy is close to
its potential output level and there are the upside risks to the
external inflation environment, including from the persistently high
oil prices. Since April 2004, MAS has maintained a policy stance of
modest and gradual appreciation for the Singapore Dollar Nominal
Effective Exchange Rate (S$NEER) policy band. The policy stance
remains appropriate. The next monetary policy statement will be
released in October as scheduled.
6. Let me now turn to growth of the financial services sector in
the past year.
Strong Performance In The Financial Services Sector
7. Financial services continue to grow in scale and
sophistication. The overall growth rate came in at 6% in 2004, and
the expansion was fairly broad-based across most key segments of
financial services. In particular, the asset management market and
corporate debt market showed good performance. The sector also
provided an important source of employment growth. Over 6,000 jobs
were created in the financial sector last year. The sector enjoyed
the highest average pay in the economy, exceeding S$5,500.
8. I shall now touch on a few areas where growth has been
commendable, starting with the asset management industry.
Assets Under Management Surged 23%
9. Asset management grew strongly. MAS' asset management survey
in 2004 indicated that total assets under management (AUM) expanded
by 23% year-on-year to over S$570 billion.
10. Singapore continues to play the role of an international fund
management centre, with 70% of total assets under management (AUM)
being sourced from overseas. The Asia-Pacific countries remain the
main source of funds but in the past few years, new high-growth
markets such as the Middle East and South Asia have emerged.
Number Of Investment Professionals Rose By More Than 15%
11. Asset management companies in Singapore have returned to
hiring, adding 149 investment professionals in 2004. This is
different from the drop we saw in 2002 and 2003.
12. Going forward, prospects for asset management are bright.
Good economic growth in Asia has attracted global investors to
allocate more investments to Asia, to ride on this growth and to
provide diversification. Within Asia, wealth creation, increasing
affluence and investor sophistication will generate strong demand
for the full range of asset management services.
13. I will now go through some highlights of the corporate debt
Corporate Bond Market Grew 20%
14. The Singapore bond market continues to develop in size and
sophistication. In the corporate debt market, our recent survey
showed total outstanding corporate debt securities rising 20% to
S$123 billion at end 2004, as a wide range of borrowers tapped the
Singapore market. The volume of new corporate debt issuance also
grew 17% to S$78.7 billion (of which S$21.7 billion were denominated
Structured Credits Accounted For 60% Of SGD Debt Issues
15. Of the total SGD denominated debt issues, structured credit
accounted for about 60% of the total. These structured credit
included equity linked notes, convertible bonds, credit linked notes
and asset securitisation transactions.
Record Number of Foreign Entities Tapped The SGD Bond
16. In 2004, the SGD bond market saw the largest number of
foreign issuers at 34, raising a total of S$3.5 billion. This
included not only corporates and financial institutions such as
General Electric and Citigroup, but also supranationals such as the
Asian Development Bank (ADB) and U.S. Agencies like Fannie Mae.
Other Areas Of Growth
17. In the treasury market, Singapore maintained its ranking as
the fourth largest forex centre in the world, according to the 2004
BIS Triennial Central Bank Survey of Foreign Exchange (FX) and
Derivatives Activity. OTC derivatives turnover also tripled to
US$17 billion in 2004. Singapore is now the 12th largest OTC
derivatives centre globally, strengthening its position as the
second largest centre in Asia.
18. We are also seeing a healthy growth of capital market
activities, particularly as companies in Asia continue to expand
domestically and abroad. The joint market capitalisation of the
Mainboard and SESDAQ rose 16% to S$452 billion in 2004, propelled by
the rise in equity prices and the growing number of listed
companies. As at end 2004, we have 625 companies listed on the
Singapore Exchange, up from 551 companies in 2003. We continue to
see a steady pipeline of foreign companies seeking listing in
Singapore. The market for real estate investment trusts (REITS) has
grown steadily in Singapore. We are now the largest REIT market in
Asia (ex-Japan). We are optimistic that with our conducive
regulatory and business environment, and the expertise of players
and supporting services here, we will continue to see strong
development of the REITs market in Singapore.
19. Let me now to touch on MAS' interactions with our
counterparts in the international arena.
MAS In The International Arena
20. MAS values the cooperation and dialogue with international
organizations, fellow central banks and regulators. We collaborate
with the Bank for International Settlements (BIS), the International
Monetary Fund (IMF), the World Bank (WB), as well as in regional
fora such as the Executives' Meeting of East Asia-Pacific Central
Banks (EMEAP), the South East Asian Central Banks (SEACEN) and the
South East Asia, New Zealand, Australia Central Banks (SEANZA).
21. Within ASEAN, we are working closely to develop our capital
markets and to create an interlinked ASEAN securities market in the
long term. The five ASEAN exchanges will launch an index of ASEAN
stocks later this year. Other initiatives such as the US$ 2 billion
Asian Bond Fund 2, as well as efforts by regulators to harmonize
regulatory standards and rules regarding cross-border distribution
of securities are important steps in that direction. ASEAN economies
grew an average of 6.3% in 2004, and the prospects in the coming
years remain good. This growth will create significant demands for
financial services, and enlarge the scope for cooperation among
ASEAN members to meet these demands.
22 Within Asia, Singapore's free trade agreements (FTAs) with
Japan, India and Korea will enhance the good relations that we have
with our counterpart agencies. In May 2005, MAS signed a Memorandum
of Understanding (MOU) with the Chinese Insurance Regulatory
Commission. MAS was admitted as a member of the Islamic Financial
Services Board in 2005. Discussions at the recent inaugural
Asia-Middle East Dialogue (AMED) highlighted many complementary
strengths and potential synergies between Asia and the Middle East.
We will therefore continue to seek areas of cooperation with
regulators in the Middle East.
23. Through all these, we hope to pave the way for stronger
growth in financial services activities between Singapore and our
partners, to promote better market access and to enhance cross
border flows of capital.
24. Let me now touch on our regulatory and supervisory work.
Enhancing Our Supervisory And Regulatory Regime
25. Our approach is to reinforce the responsibility of the board
and management of financial institutions to maintain good risk
oversight of its business activities, deal fairly with customers and
ensure compliance with regulatory standards.
26. As we operate in an increasingly complex environment, it is
important that financial institutions understand what MAS aims to
achieve through our supervision and regulation. In this regard, we
published a monograph last year, stating MAS' objectives of
supervision, the functions that MAS performs, and the principles
that guide our supervisory approach. In this year's annual report,
we have gone a step further to provide information on our
inspections and supervisory reviews, including information on some
of the thematic inspections that were carried out.
27. To better understand risks in a more inter-connected system,
we have dedicated more resources to macro-prudential surveillance.
In particular, we have been undertaking analysis of macroeconomic
and financial developments and their implications for the stability
of the financial system. In December 2004, we began to publish our
assessments in the Financial Stability Review (FSR) a semi-annual
publication. The FSR communicates our views and findings on the
risks and vulnerabilities of Singapores financial system.
28. By promoting a better understanding of our operations and
communicating our assessments, market players can gain a better
understanding of MAS' expectations as well as major issues affecting
Singapore's financial system. Together, MAS and the industry, can
work towards achieving a sound and progressive financial services
29. We have also taken steps to enhance our regulations to keep
pace with this rapidly changing world where new complex products and
business models are constantly being introduced.
30. In the past year, we fine-tuned the Financial Advisers Act to
regulate the sales and advisory process for new hybrid investment
products such as structured deposits and traded life polices. To
ensure high standards of probity, professionalism and business
conduct in the trust services industry, we introduced the Trust
Companies Act. We also introduced a regulatory framework for
Business Trusts, creating a new asset class for investors and adding
more depth and sophistication to our markets.
31. As more financial products are introduced, consumers need to
understand these products well to make informed decisions.
MoneySENSE embarked on the first national financial literacy survey
earlier this year. The survey aims to benchmark the current level
of financial literacy among Singaporeans, and enable MoneySENSE to
better develop and deliver financial education programmes to the
32. MAS also facilitated the set-up of the Financial Industry
Disputes Resolution Centre (FIDReC) to enhance the efficiency of
dispute resolution mechanisms for retail consumers. FIDReC brings
together existing dispute resolution schemes under the banking and
insurance sectors, with extended coverage to include the capital
33. Before I conclude, let me move on to the Annual Accounts.
34. Compared to the previous financial year, MAS posted a lower
net profit of S$3,850 million for the year due to less buoyant
35. MAS' total assets grew by 8.2% to S$194,485 million at 31
March 2005. The Currency Fund's net external assets of S$17,484
million at the financial year-end exceeded the currency in
circulation, providing 113% asset backing.
36. MAS continues to be focused on supporting non-inflationary
economic growth, developing the financial sector and enhancing the
supervisory framework for a sound and resilient financial sector.
37. We will also continue to engage the industry in exchanges of
views and insights, and pursue mutually beneficial goal to grow
Singapore's position as a vibrant and sound financial centre serving
the needs of increasingly sophisticated domestic as well as
www.mas.gov.sg News Room 22 Jul 2005