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Country Profile: Singapore’s securities finance market

15 March 2017

Regulations would bring Singapore in line with international short-selling guidelines, with tri-party collateral management set to be increasingly adopted by local banks

"Calibrated monetary easing and fiscal measures, such as tax and wage credits for businesses and measures to ease corporate credit conditions and restore cost competitiveness, provide a favourable backdrop to support supply-side reforms," HSBC analysts stated in an investment outlook in February.

"The government has responded to the structural growth slowdown with a step-up in inter-agency collaboration to help industries/companies and workers to cope with structural challenges, identify and expand new growth sectors as well as address frictional unemployment and shortfalls in social policies and infrastructure etc."

However, Singapore’s economic growth outlook remains fragile, with external weakness spilling into weak domestic demand and negative repercussions for the labour market. There is a risk that rising trade protectionism and antiglobalisation negatively impacts global trade and regional financial centres such as Singapore.

"The country’s transition from a labour-driven growth model to a productivity-driven one remains challenging and incurs short-term pains. Singapore faces the risk from rising US interest rates," HSBC’s analysts added.

"A shifting manufacturing landscape, higher corporate and household debt servicing burden amid worsening profitability and labour market, tighter financial conditions, and a weak property market are headwinds.

"Concerns about banks’ asset quality, particularly their exposure to the oil & gas sector, linger, although lending to the sector accounts for a small portion of the total loan book and the recent rebound in oil prices, if the trend sustains, may help mitigate such risk.

ICBC Standard Bank: Expert eye on repo

Singapore is the main financial centre for South East Asia. There are no legal impediments to conducting GMRA business and the local market is mature and well established.

There is a great deal of activity in US dollar-denominated securities, with a preponderance for high-grade papers. Singapore is regarded as an important centre for repo trading of US Treasuries and US dollar-denominated bonds issued globally.

The Singapore dollar (SGD) market is also developed and despite a number of participants pulling out of the cross-currency space in the past 18 months, there is still a degree of interest in financing paper against US dollar.

Wei-Shee Chia from ICBC Standard Bank comments: "The bulk of the non-UST demand I see derives from a cross-currency financing for SGD-denominated assets. The market views these papers as high quality and the level of haircut we are able to charge against US dollar makes it an attractive proposition for our customers among local financial institutions." 

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