MAS sounded a cautionary note

The Macroeconomic Surveillance Department of Monetary Authority of Singapore (MAS) released its annual Financial Stability Review (FSR) on 9 November 2009.

 

Though we may have seen the worst of the financial crisis which was exacerbated by the bankruptcy of Lehman Brothers Inc. in September 2008, the downside risks for the Singapore economy still remain. Singapore is still subjected to economic recovery of US and Europe, which are our major trading partners. The financial stability of their financial institutions is still being propped up by the governments and the nascent economic turnaround is due mainly to the huge stimulus package put up by the governments.

 

All eyes are on how the governments will remove the stimulus packages and allowing the private sector to work their magic again. That will take some time as the unemployment rates are still high and business investments will not be forthcoming as uncertainty in economic recovery still prevail.

  

Since March this year, Singapore stock market and the property market have risen significantly from the trough. The exuberance seems misplaced.

 

“The rise in risk appetite and sharp rebound in financial markets since Q1 2009 may have outpaced economic fundamentals, given the uncertainties facing the global economy and financial system,” MAS reported.

 

This is correct assessment though some investors may not want to acknowledge. The asset bubble may be forming if this is left unchecked. It will be wise to be cautious as we think of putting more money into investments.

Written on 11/10/2009 5:31 PM

 

Copyright © 2009, the author known as LKT in Singapore.

 

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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