MAS ( Monetary Authority of Singapore) is currently holding gold's worth at least 10 billion Singapore dollars as of mid-2023.
截至 2023 年中期，MAS（新加坡金融管理局）目前持有价值至少 100 亿新加坡元的黄金。Jiézhì 2023 nián zhōngqí,MAS(xīnjiāpō jīnróng guǎnlǐ jú) mùqián chí yǒu jiàzhí zhìshǎo 100 yì xīnjiāpō yuán de huángjīn.
MAS (Pihak Berkuasa Kewangan Singapura) kini memegang nilai emas sekurang-kurangnya 10 bilion dolar Singapura pada pertengahan 2023.
MAS (சிங்கப்பூர் நாணய ஆணையம்) தற்போது 2023 ஆம் ஆண்டின் நடுப்பகுதியில் குறைந்தபட்சம் 10 பில்லியன் சிங்கப்பூர் டாலர் மதிப்புள்ள தங்கத்தை வைத்திருக்கிறது. MAS (ciṅkappūr nāṇaya āṇaiyam) taṟpōtu 2023 ām āṇṭiṉ naṭuppakutiyil kuṟaintapaṭcam 10 pilliyaṉ ciṅkappūr ṭālar matippuḷḷa taṅkattai vaittirukkiṟatu.
This nation first bought gold in 1968. Negara ini pertama kali membeli emas pada tahun 1968. 这个国家于 1968 年首次购买黄金。Zhège guójiā yú 1968 nián shǒucì gòumǎi huángjīn. இந்த நாடு முதன்முதலில் 1968 இல் தங்கத்தை வாங்கியது. Inta nāṭu mutaṉmutalil 1968 il taṅkattai vāṅkiyatu.
Monetary Authority of Singapore (MAS) is not the only entity managing Singapore's Reserves. The other two entities have been (Government of Singapore Investment Corporation, established in year 1981) GIC Private Limited and Temasek Holdings Limited, (incorporated on 25 June, 1974), a state-owned but run separately from the government to focus on growing the national reserves.
GIC and Temasek have different investment strategies. So GIC is the government's fund manager, a slightly more conservative investor than Temasek. Temasek is a pure equities investor. It would take on higher risk but also that would allow it to achieve higher expected returns.
We could explain the different risk appetites using a game of football ⚽️ .
○●Temasek invests mainly in equities and even startups. Higher risks but higher returns. That’s akin to having five Strikers but two Defenders. It’s an attack-minded approach designed to score more and generate higher returns but taking more risks with fewer defensive assets.
●○ GIC has more defensive assets than Temasek. And hence, less aggressive on the attack. Taking less risk in the pursuit of returns. Regardless of the different risk appetites, both entities invest for the long haul. For them, is the performance for an entire season that matters rather than the scoreline of a specific match.
Part 1 of 3 ( here )
Part 2 of 3 ( here )
Part 3 of 3 ( here )
Part 1 : In any given year, the Singapore reserves contribute up to a fifth of government spending. This sum is merely half of the annual returns that come from investing the huge capital sum that makes up the country's reserves. While a chunk of it is invested in gold, Singapore's proverbial pot of gold is actually invested in a wide range of assets all across the globe, thanks to an army of people from three entities¹ - each with a slightly different mandate. (¹ MAS, TEMASEK, GIC)
Through exclusive interviews with top leaders and insiders of 'Singapore Inc', we reveal what exactly makes up the republic's reserves, the unique infrastructure that the city state has built to guard and grow its wealth, the 'hidden' role that these reserves play not just for the island's economy. and answer the million-dollar question: WHY ARE THE NATIONAL RESERVES OF SINGAPORE SUCH A HUGE SECRET?
Question: Why are the reserves such a huge secret?
01 What if Singapore didn't have reserves?
03 How Singapore's reserves affect grocery prices
06 Defending the Singapore dollar
14 Unveiling Singapore's gold
15 What's the difference between GIC and Temasek?
18 Prime Minister of Singapore shares about the reserves
●Companies Singapore invested in through GIC
●Major international properties invested in through GIC
●Responding to keyboard warriors
● The GIC investment returns shown have been adjusted for inflation but Temasek's figure is not. GIC's comparable nominal investment should be 7%, rounded up to the nearest number.
● Importance of Government Linked Companies
●How large are Singapore's national reserves?
●Is everything government-linked part of the reserves?
●How Singapore's reserves guarantee CPF interest rates
●How land reclamation contributed to our nation
●What is Net Investment Returns Contribution (NIRC)?
When you think of Singapore Reserves reserves, how many of you immediately imagined it to look something like this, all those savings locked up in a highly Secured Vault in a top secret location. Well, you may not be entirely wrong. For the first time on national TV, we aim to demystify the Singapore reserves and hopefully answer the question. Just how much does this tiny Island have?
As a start we troll through the spreadsheets of every entity linked to the reserves. That’s like trying to read an Epic Novel and starting from the last page. No wonder most Singaporeans give up trying to understand what makes up the reserves. So, we did the next best thing. We wrote to the Monetary Authority of Singapore ( MAS), the country's Central Bank.
To: Monetary Authority of Singapore
Subject: Singapore Reserves
Dear Monetary Authority of Singapore,
We are doing a series to demystify our reserves. Can you tell us what is in the Singapore Reserves?
Yours Truly,
CNA
[Email Sent]
After some negotiations, the Central Bank of Singapore granted the CNA team exclusive access to a vault but on the condition that we sign an undertaking to keep the location secret as well as leave behind all devices with GPS tracking. And just so we don't leak out where our reserves are kept unintentionally, we offer to take this additional measure end (we were blindfolded) and off we go.
________________________________
UNDERTAKING TO SAFEGUARD OFFICIAL INFORMATION
My attention has been drawn to the Official Secrets Act 1965 and in particular to section 5 thereof which relates to the safeguarding of official information.
2. I understand and agree that all official information acquired by me in the course of my work with the Monetary Authority of Singapore is of a strictly secret and confidential nature, and is not to be published or communicated by me to any person in any format whatsoever except in the course of my official duties on a strictly "need-to-know" basis.
3. I shall ensure that any person who is authorized by me to have access to any official information has similarly signed an undertaking to safeguard official information before I publish or communicate any official information to that person.
4. I undertake to retum, or if directed by the Monetary Authority of Singapore, to irrevocably destroy (i) any document or information received from the Monetary Authority of Singapore, and (i) any other copies made or reproduced from such document or information or part thereof, whenever required by the Monetary Authonty of Singapore
5. I further understand and agree that any breach or neglect of this undertaking may render me liable to prosecution under the Official Secrets Act or civil proceedings
(Name of Individual) (Date)
========================
Does this room look familiar. Well, we've set it up to look just like it did over the last three years ( 2020 - 2022) when Singapore's ministers gave regular updates on the COVID-19 outbreak in Singapore.
LAWRENCE WONG, SINGAPORE DEPUTY PRIME MINISTER, also the Finance Minister for Singapore : "This is a lot of familiarity with this environment. And I see you have recreated it to be almost like it to be almost like what we had during the press conferences. I had to come here repeatedly. In 2020, when COVID-19 epidemic started we were still not quite sure how severe it was going to be. Then in March, things crystallized, we knew it was going to get quite bad. And we needed additional measures. And by then, we had no more, uh, fiscal resources."
HENG SWEE KEAT, SINGAPORE DEPUTY PRIME MINISTER, also Finance Minister for Singapore (2015-2021) : "The government has obtained President's in-principle support to draw up to 17 billion dollars (US$12.6 B) to fund some of the measures to save jobs and the economy."
LAWRENCE WONG : "We needed to go to the President for reserves. The only alternative would have been to borrow, which is what most other countries do. When you borrow, you have great uncertainty. You don't know how much you can borrow. You don't know how markets will react. And therefore I think it would have impacted the swiftness and the decisiveness of our response. We were the first (country) in Asia to get the Pfizer-BioNTech vaccine. And the reserves played a critical role in enabling us to do so. I have no doubt that without the reserves, we would have ended up with more lives lost , in Covid. And certainly we would have ended up with a much higher unemployment."
For most people in Singapore, the pandemic was the first time the reserves made a palpable difference to their lives. But while awareness increased, it unfortunately reinforces this impression that the national reserves is an emergency piggy bank, something that's
only useful during a national crisis. But in reality these reserves do a whole lot more.
TERENCE HO, Economist, LKY School of Public Policy, National University of Singapore : "Ten years ago (2013), this $50 dollars note could buy all this, with some change to spare. But today, this would set you back about ten dollars more (S$59.13). This is an example of inflation; the rise of the price of goods and services over time. When an economy is doing well, people tend to spend more. And when firms see the increased demand, they will increase prices to maximize profits. So inflation could rise as a result of very strong demand. But it also rise because of a rise in production costs or a shortage of supply, especially of imports."
Central banks (around the world) are responsible for keeping rising prices in check. Most do this by adjusting the interest rates. When interest rates are raised, borrowing money becomes more expensive. People tend to spend less and businesses will lower their prices because of decreased demand. Unlike most other central banks, the Monetary Authority of Singapore or MAS, Singapore’s Cantral Bank , manages the exchange rate instead. That’s because Singapore is an open economy that's heavily dependent on trade. So the exchange rates have a bigger impact on prices than interest rates. For example, Singapore imports 90 percent of its food like
How Singapore manages its reserves
Keynote speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the National Asset-Liability Management Europe Conference, Singapore, 13 March 2019.
Ladies and gentlemen, good morning.
Singapore has official foreign reserves (OFR) of almost US$300 billion.
• In absolute terms, this is the eleventh highest stock of OFR in the world.
• As a percentage of GDP and on a per capita basis, it is the third highest in the world.
• Singapore's OFR sit on the balance sheet of the Monetary Authority of Singapore (MAS), the central bank and integrated financial regulator.
Besides the OFR, there are two other pots of national reserves in Singapore:
• The Government of Singapore Investment Corporation (GIC), a fund management company, manages on behalf of the Singapore Government a diverse portfolio of foreign assets - well in excess of US$100 billion.
• Temasek Holdings, an investment company wholly owned by the Singapore Government, holds equity stakes in a variety of domestic and foreign corporates, amounting to more than US$200 billion.
This morning, let me try to answer three questions:
What role do the reserves play?
• How are the reserves accumulated and managed?
• How are the OFR managed?
• Why does Singapore hold reserves?
Singapore's reserves serve three objectives:
• one, to serve as a buffer against crisis;
• two, to provide a stream of investment income to help finance part of the annual government budget; and
• three, to maintain confidence in Singapore's exchange rate centred monetary policy.
The reserves are thus a rainy day fund, an endowment fund, and a stability fund.
The imperative to hold a buffer against crisis is rooted in Singapore's geography and history.
• Singapore is a city state smaller than Greater London.
• It has no natural resources and imports most of its food, including water.
• When it became independent in 1965, it had no hinterland and meagre financial reserves.
• It depended mostly on entrepot trade and hardly had an industrial base.
• It was not expected to survive, let alone succeed.
An acute sense of vulnerability has been part of Singapore's DNA since its birth. This sense of vulnerability, in turn, underpinned two convictions:
• first, that the only way to survive and make a living is to make ourselves relevant to the world; and
• second, we must build up strong buffers so that we can withstand the shocks that come with being so small and open to the world.
As Singapore grew and prospered as a business and financial centre, its vulnerabilities to the vagaries of global trade and financial cycles also grew.
• The need to build up a sufficient rainy day fund to tide us through shocks and crises has remained as relevant as ever.
• Total trade is three times the size of the Singapore economy.
• Gross capital flows into and out of Singapore are 77% of GDP.
The role of the reserves as a rainy day fund is not theoretical. The reserves have indeed served us well in past crises.
• They helped underpin confidence in Singapore in the throes of the Asian Financial Crisis.
• And during the Global Financial Crisis, the reserves were drawn down to finance a package of measures, to preserve jobs by subsidising employers' wage bills and to help viable companies stay afloat by sharing the risk of bank lending.
A second purpose of the reserves is to serve as an endowment.
• This purpose has grown in importance - and salience - in recent years.
• The income from investing the reserves provides an increasingly important source of revenue to fund government expenditure.
• The size of government in Singapore is small. Government spending - comprising both operating and development expenditure - is just about 16% of GDP.
• But tax and non-tax revenues are even lower, at 15% of GDP.
In other words, Singapore runs a structural deficit on its primary fiscal balance.
This is where the investment income from the reserves comes in.
• The Constitution of Singapore bars the government from borrowing to spend or to spend surpluses accumulated from previous terms of government.
• Instead, it allows the government to spend up to half of the expected long-term real returns from the net assets invested by MAS, GIC, and Temasek.
• This is known as the Net Investment Returns Contribution (NIRC).
• The NIRC is already the largest single contributor to revenues in the government budget, accounting for about one-fifth of revenues.
The role of the reserves as an endowment from which to draw a steady stream of income to finance the government budget will become even more important in the years ahead.
• An ageing population will mean higher expenditures, especially for healthcare, and slower economic growth will mean lower tax revenues.
The third purpose of the reserves is to serve as a stability fund. More specifically, the reserves help to maintain confidence in Singapore's exchange rate-centred monetary policy framework.
• As Singapore is a small and ĵmñ open economy, inflation and aggregate demand are more significantly influenced by the exchange rate rather than interest rates.
• Singapore's monetary policy is therefore centred on managing the exchange rate of the Singapore Dollar against a basket of currencies within a policy band.
• The reserves play an important role in enabling MAS to conduct monetary policy and to secure macroeconomic stability.
How are the reserves accumulated and managed?
So, how are the reserves accumulated and managed? As I mentioned earlier, Singapore's reserves are held and managed in three distinct pots: the MAS, GIC, and Temasek.
• The government sets the overall investment objectives for the three entities and monitors the risk and return profile of the total reserves.
• But it plays no role in the investment decisions by the three entities, which are made on purely professional grounds.
MAS, as Singapore's central bank, manages the OFR. The process of accumulating or using OFR is intricately tied to MAS' conduct of monetary policy.
• The MAS may accumulate or sell foreign assets, principally through its intervention operations in the foreign exchange market, to manage the float of the Singapore Dollar.
• Given Singapore's positive net savings and persistent capital inflows, the nominal exchange rate often tends to appreciate more than what is required to keep inflation low and stable.
• The MAS accumulates foreign assets on average in the process of managing the Singapore Dollar within its policy band even as it sells foreign assets during times of stress on the Singapore Dollar.
As the central bank, the MAS is the most conservative of the three investment entities, with the OFR invested mainly in safe and liquid assets.
• The OFR is sized to take into account its role as a buffer against a large and sudden outflow of capital that would undermine confidence in the exchange rate and Singapore's macroeconomic stability.
• Traditional measures of reserve adequacy such as the number of months of imports the OFR could finance if all other sources of foreign financing dried up are less relevant for Singapore.
• A sizable and liquid OFR sends a clear signal that MAS has the wherewithal to resolutely defend the Singapore Dollar against speculative attacks.
The GIC is a professional fund management company that manages the government's foreign assets. These assets are separate from the OFR.
• The history of GIC begins with the MAS.
• Through the 1970s, Singapore ran persistent fiscal surpluses, received sizeable capital inflows, and had an elevated private savings rate.
• This led to a substantial accumulation of OFR, well in excess of what was required for MAS' central banking operations.
• So, in 1981, the GIC was set up - in today's parlance, a sovereign wealth fund - to manage part of the reserves for higher returns without the central bank constraints of liquidity.
• Part of the OFR was transferred from MAS to GIC, which was tasked to invest the reserves in a globally diversified portfolio of asset classes with a higher risk profile to deliver good long-term returns.
The third pot of reserves is managed by Temasek Holdings, an investment company wholly owned by the government.
• Temasek's history also dates back to the early years of Singapore's development.
• There was little private capital in those days but a rapidly industrialising economy needed key infrastructure - in aviation, in shipping, in telecommunications, in banking, and so on. The government therefore set up enterprises in these areas.
• Temasek was formed as a holding company in 1974 for these enterprises so that the government could focus on its roles of policy making and regulation without conflict, while Temasek would own and manage these investments on a commercial basis.
Today, Temasek is an active, equity investor that aims to deliver sustainable long-term shareholder value.
• More than a quarter of Temasek's portfolio is invested in Singapore, with the rest invested in Asia and global markets.
• The initial portfolio was provided by the government, but since then, Temasek's funds have come mainly from the investment growth of its own portfolio.
• Compared to MAS and GIC, Temasek is further out on the risk-return spectrum.
How are the OFR managed?
Let me now move to the third question: how are the OFR managed? This is the portion of the reserves that MAS is responsible for.
There are three prongs to MAS' approach to managing the OFR
• robust risk management;
• balanced asset allocation; and
• efficient investment process
Robust risk management
The starting point to MAS' approach to managing the OFR is its risk management framework, which sets out the liquidity and risk tolerance levels of the OFR. These relate to:
• the ability of the portfolio to meet liquidity needs under stress conditions; and
• the maximum loss of the portfolio under tail risk scenarios.
These liquidity and risk tolerance levels are determined on the basis of what is minimally required to meet the objectives of the OFR in supporting MAS' conduct of monetary policy. They are factored in the construction of the MAS portfolio and closely monitored on an ongoing basis.
MAS employs a comprehensive range of stress tests to assess the risks to the portfolio on an ongoing basis and establish whether the portfolio remains resilient to potential tail risk events over the medium term.
Three types of stress tests are conducted:
• Historical: Shocks are applied to the portfolio using asset price movements seen in historical stressed episodes, such as the Global Financial Crisis, 2000 dot-com bust, 1994 bond market selloff, etc.
• Vulnerability-based: The portfolio is subject to hypothetical scenarios which stress in turn each of the portfolio's risk factors such as equity, interest rate, credit, inflation, and foreign exchange.
• Thematic: These are forward-looking stress tests and are designed by taking into account prevailing market conditions and potential risk events on the horizon.
Depending on the stress test results, MAS will consider appropriate responses and portfolio adjustments when needed.
The risk management framework is reviewed on a regular basis to ensure it remains fit-for-purpose.
Balanced asset allocation
Subject to the liquidity and risk tolerance thresholds, MAS seeks to achieve good long-term returns on the OFR through a balanced asset allocation.
MAS invests the OFR in a well-diversified portfolio, probably more diversified than is the case for most central banks.
• The portfolio is geographically diversified across advanced and emerging market economies, with investment-grade bonds in advanced economies making up the largest share.
• The portfolio is diversified across asset classes - in cash, bonds and equities.
• The portfolio has a diversified currency mix, with about three-quarters of the OFR denominated in US Dollars, Euros, Japanese Yen and Pound Sterling, with the US Dollar forming the bulk.
Each asset class in the portfolio serves a function.
• Cash and nominal government bonds facilitate regular operational needs and can be quickly deployed to fulfil urgent liquidity needs under stressed conditions.
• Advanced economy inflation-linked bonds are less liquid than nominal bonds but provide inflation protection.
• Equities provide exposure to long-term growth assets with higher return potential but also with higher risk.
MAS' investment horizon is longer than that of many central banks.
• This has given MAS the flexibility to invest in more volatile (and longer 'duration') asset classes beyond fixed income, including equities.
Both the risk management framework and strategic asset allocation are approved by the MAS Board of Directors and reviewed regularly.
Efficient investment process
MAS strives to achieve an efficient investment process, underpinned by two elements:
• one, judicious benchmark selection and customisation; and
• two, tapping on specialised external investment expertise
First, benchmark selection. MAS uses asset class benchmarks to represent the investment universe and risk profile of each asset class that can be easily replicated, to evaluate its investment performance.
These benchmarks could be market-capitalisation weighted or customised.
• For some asset classes, we have chosen to apply certain customisations to market-capitalisation weighted benchmarks, guided by considerations of liquidity, stability, and concentration risk.
One area we have applied customisation is in the fixed income asset class, where it is relatively more important to guard against concentration risk.
• This is because the response to credit risk is more asymmetric for fixed income than for equities. There is limited upside for credit improvement but large downside from the threat of default.
• We have therefore limited our exposure to some large government bond markets, taking into account the default risk of these bonds.
Another area where we have customised our benchmark is with respect to Renminbi (RMB) assets, in particular Chinese government bonds.
• Here, the consideration was not to limit exposure but to gain exposure ahead of market benchmark inclusion as markets develop.
• MAS started investing in RMB assets in 2012, fully expecting market indices to catch up at some point.
• Indeed, recent announcements by major index providers to include or accelerate the schedule of inclusion for RMB assets in their indices reflect this trend.
Next, tapping on relevant investment expertise. Part of the MAS portfolio is managed by reputable external fund managers.
• These investment managers are hired for their deep investment expertise and specialised knowledge in particular investment fields.
For instance, factor-based investing is an area that we are watching closely.
• Institutional investors are starting to look beyond asset classes to view returns via a "factor lens".
• There are two applications of this approach, return enhancement and portfolio analysis.
• Looking through asset class labels to underlying risk factor exposures can enhance understanding of return sources.
• Flipping them around, they also help to enhance understanding of risk drivers.
In fact, the vulnerability-based stress tests that I described earlier is an application of this factor approach.
• This can help investors to create more efficient and diversified portfolios, compared to a traditional asset class-driven approach.
• But we are also mindful not to fall into the trap of data-mined quantitative strategies that rely on factors that may not be robust through time.
Conclusion
In Singapore, reserve management is a multi-objective, multi-agency, and most importantly, a multi-generational effort.
• The reserves serve as a buffer against bad times, as an endowment to finance current needs, and as a foundation for macroeconomic stability.
• As custodians of the national reserves, MAS, GIC, and Temasek owe a duty of care and responsibility to the ultimate beneficiaries of the reserves - current and future generations of Singaporeans.
• It is a duty that motivates our investment and risk managers as they go about their work each day, trying to extract value while staying clear of pitfalls, amidst the turbulence, tides and ebbs of financial markets.
Thank you.
