MAS Record Loss! - An explanation

[scroobal]

I have seen threads here and in other forums on the MAS losses and till today Singaporeans have no clue what their govt is doing or what central banks do. Let me try and explain if I can.

Firstly learn to join the dots.
- First record loss of nearly $9 B in March 2009
- Record profit of $10B in March 2010
- Second record loss of $10.9 in March 2011.

Notice how close the numbers are in 3 years. These things don't fall from the sky, not a fluke neither is it because the sun and the moon are in line.

Here is how we operate our monetary policy especially our forex. Singapore is a rather small economy and 67% of it is directly or indirectly controlled by Govt and via GLCs.

With such control, it can literally set the value of SGD against all other countries with relative precision compared to any other economy. It also has a fighting currency fund of $300B, the bulk of it is in foreign currencies. It determines the value of SGD against a basket of currencies which is an official secret but over the years USD, AUD, Euro and Yen are definitely in and in that order.

Now the finer controls. All forex traders in Singapore have a personal file with photo that employers must submit to MAS. Bulk of the trades are done with DBS. Any trader attempting to second guess or hop on to MAS trades is quickly taken out.

Those watching SGD will realise that everytime Singapore wants to make a major purchase in arms, aircraft including commercial, renewal of foreign SAF bases or training facilities around the world the SGD will be high.

If this was not a sovereign action by a state, it will be regarded as market manipulation. It is not a term associated with forex because the pool is huge but SGD is tighly controlled.

If you look at the landscape, the SGD has appreciated by roughly 10% against USD, nearly 5% against Euro and GBP. Only the Yen has appreciated.

Clearly Singapore has been raiding the international markets for equities and cheaper currencies over the last 3 years.

Both GIC and Temasek are clearly beneficiaries as the stronger dollar means cheaper buys. The fact that the same individuals are either sharing the same background, same house or even same bedroom, tells an interesting tale.

In essence, the loss is not even a paper loss. In simple terms, I started with 10 balls in my left pocket, I transferred 2 to my right pocket and along the way, managed to get another 3 balls into my right pocket from the market place. Though I lost 2 from my left pocket, I have a total of 13 balls in both pockets. a net gain of 3 balls. The left pocket is denominated in SGD while the right pocket is in foreign currencies.

Nobody will take on MAS including foreign speculators because of the fighting fund and the ability to access liquid reserves on the fly. The Asian currency crisis proved that.

MAS generally does not speculate in currencies unlike the Malaysians under Mahathir where the latter became the largest forex speculator in the world in the 80s and 90s until they lost their pants and the Governor of Bank Negara was removed and a lady took over.

Singaporeans are generally screwed by the PAP but this is not one instance.

 

[singveld]

very complicated leh. dun understand, i forgot to tell you i fail my economic.
but i know it is cheaper to go to London now for holiday. yeah.

 

[Sperminator]

see if i can simplify the codes above;

What Scroobal want to say perhaps is the following (Please correct me if I am wrong, Scroobal),

1. Singapore have a SGD 300 Billion [ANTI-SPECULATION FUND] a fund that will prevent any Forex Speculators from devaluing SGD, or whatever they want to do in SGP Economy.

2. Singapore Government owns 67% of Singapore's economy, making Singapore a Socialist State, and also with such high control over the economy, the SGD is fully within control.

3. In order to prevent speculations, the trading of stocks in SGP is tightly regulated by DBS, and if any trader want to match MAS trades, it'll be removed.

4. Now the grand slam, when MAS declares losses, it is not really losses, as the money is just being transferred to somewhere else, what scroobal says by left pocket to right pocket. and since there is a huge control over the trading market, the economy, and the currency itself, this can be done only by MAS.

did i get the above right?

 

[streetsmart73]

hi there


1. aiyoh!
2. i really don't know what to say.
3. the elite sheep are so elite that they could not lower themselves speaking in layman terms.

 

[bryanlim1972]

- First record loss of nearly $9 B in March 2009
- Record profit of $10B in March 2010
- Second record loss of $10.9 in March 2011.

based on your left pocket-right pocket analogy, we are still short of SGD 9.9 Billion. which pocket is that in? center pocket?

 

[scroobal]

Let me try and add on to the sperminator's simplification

1. They are accumulating the pool of foreign currency reserves. The foreign currency in the key currencies are historically cheap because the developed economies are under performing at the same time.

2. The higher valued SGD is kept unusually high so that they can go and do major shopping of arms, stockpiling building materials etc.

3. This Govt has near full control of SGD. The value can be literally set by them.

 

[LeMans2011]

If the strength of SGD is manipulated, it means we do not have to worry about the 10 billion FX loss because these are translation losses of Singapore's foreign reserves holdings, which can be reversed by devaluing the SGD.

 

[scroobal]

Thanks, that is exactly right. I expect the the reversal to take place next year unless the developed economies continue to slide.

If the strength of SGD is manipulated, it means we do not have to worry about the 10 billion FX loss because these are translation losses of Singapore's foreign reserves holdings, which can be reversed by devaluing the SGD.

 

[johnny333]

With the high SIN$ won't the local exports suffer because Spore made goods are now higher

 

[Forvendet]

With the high SIN$ won't the local exports suffer because Spore made goods are now higher

On the other hand, Sing imports are getting cheaper. Sing imports more than exports. Even Sing manufacturing and export industries are reliant on imports since Sing doesn't produce own raw materials.

 

[johnny333]

On the other hand, Sing imports are getting cheaper. Sing imports more than exports. Even Sing manufacturing and export industries are reliant on imports since Sing doesn't produce own raw materials.

I don't think prices of imported goods are cheaper. In fact I've noticed that prices are higher. When you consider that "real" inflation in Spore is in the double digits it's not surprising.

 

[scroobal]

They do. Its a case of balance. All major companies have treasury functions and they do exactly that. They more or less can read what MAS and the wider forex market is doing. Typically they bring in capital goods such as high end machinaries and parts at such time. It explains why foreign MCs like to set up shop here - they are able to work with the narrow band that SGD moves.

I remember that one company despite its relative small size had a one man treasury staff and you can spot them by their specialised keyboard and

With the high SIN$ won't the local exports suffer because Spore made goods are now higher

 

[scroobal]

Got a point there. Our imports are at low end. SGD vs the SEA countries and Australia are kept at a narrow band as this is food supply sources. Note that AUD has moved drastically against the USD but very little against the SGD. Both AUD and Canadian dollars are called commodity currencies because of their heavy reliance on food and mineral exports.

On the other hand, Sing imports are getting cheaper. Sing imports more than exports. Even Sing manufacturing and export industries are reliant on imports since Sing doesn't produce own raw materials.

 

[Ash007]

So you saying we should be shorting SGD in the future?

 

[Forvendet]

I don't think prices of imported goods are cheaper. In fact I've noticed that prices are higher. When you consider that "real" inflation in Spore is in the double digits it's not surprising.

I don't know where you get your "real" "double-digit" figure from. Take common hawker dish price rising from $2 to $2.50 over 5 years, that's 20% over 5 years and 4% per year. Even the average Mc meal only rose from about $5 to $6 over 10 years. If you talk about flats and houses, that's asset appreciation, not inflation.

 

[Papsmearer]

Got a point there. Our imports are at low end. SGD vs the SEA countries and Australia are kept at a narrow band as this is food supply sources. Note that AUD has moved drastically against the USD but very little against the SGD. Both AUD and Canadian dollars are called commodity currencies because of their heavy reliance on food and mineral exports.

U did not mention that this manipulation of the singapore dollar to a high level has resulted in inflation in singapore, and I am not talking about the BS 5% or whatever that MAS claims. We the peasants have to pay the price of all this. Everything is more expensive now.

 

[Unrepented]

If it can be controlled and preplanned, then would we not be able to hedge effectively to prevent translation losses

If the strength of SGD is manipulated, it means we do not have to worry about the 10 billion FX loss because these are translation losses of Singapore's foreign reserves holdings, which can be reversed by devaluing the SGD.

 

[Forvendet]

U did not mention that this manipulation of the singapore dollar to a high level has resulted in inflation in singapore, and I am not talking about the BS 5% or whatever that MAS claims. We the peasants have to pay the price of all this. Everything is more expensive now.

Everything? Are you sure you don't want to reconsider and edit?

 

[Unrepented]

Please explain.

.... If you talk about flats and houses, that's asset appreciation, not inflation.

 

[sirus]

Could this timing of announcement link to the PE? ha..ha...