MAS set for aggressive action come Monday: What to expect

SINGAPORE (BLOOMBERG) – Singapore’s central bankers are poised to take unprecedented action on Monday (March 30) to bolster financial markets and support an economy facing a severe recession.

The Monetary Authority of Singapore, which uses the currency as its main policy tool rather than interest rates, will probably take unusually aggressive action of two moves, according to economists surveyed by Bloomberg.

All 11 in the poll see the MAS reducing the slope of its currency band to zero and re-centering the band downwards.

The last time the central bank lowered the band’s center was during the global financial crisis in 2009.

The MAS – which decides policy twice a year, typically meeting in April and October – has refrained from following global central banks in delivering emergency action in recent weeks, but moved up its meeting to Monday.

Economic conditions have worsened considerably this month as the coronavirus outbreak spreads widely, with Singapore’s government on Thursday projecting a contraction in gross domestic product this year of 1 per cent to 4 per cent.

Finance Minister Heng Swee Keat allocated an additional $48 billion in virus relief in a supplementary budget, boosting the city’s total stimulus this year to 11 per cent of GDP.

Here’s a look at what’s expected in the central bank’s statement on Monday:


The MAS guides the local dollar against a basket of currencies and adjusts the pace of appreciation or depreciation by changing the slope, width and center of a currency band. It doesn’t disclose details of the basket, the band or the pace of appreciation or depreciation.

The MAS has never re-centered the band and shifted the slope to zero appreciation at the same meeting, according to Mitul Kotecha, senior emerging markets strategist at TD Securities in Singapore.

“These are, however, unprecedented times, the extent of the shock calling for more drastic action,” he said.


A more drastic move than normal would be justified by lower consumer price inflation in January and February, a weaker oil-price trajectory, and softening domestic cost pressures, according to Citigroup economists Wei Zheng Kit and Kai Wei Ang.

Consumer-price growth eased to 0.3 per cent in February, while the core measure declined for the first time since 2010.

As core inflation is likely to remain in contraction in year-on-year terms in 2020, a re-centering of the currency band is likely, Sin Beng Ong, an analyst at JPMorgan Chase Bank in Singapore, wrote in a March 24 research note.

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MAS to offer US$60b in US dollar lending to banks from new swap line with Fed

SINGAPORE – The Monetary Authority of Singapore (MAS) said on Thursday (March 26) it will draw on its new currency swap line with the US Federal Reserve to provide up to US$60 billion (S$86.8 billion) of US dollar (USD) funding to banks in Singapore.

The swap line was announced last week as part of coordinated central bank actions to alleviate the surge in demand for US dollars from the impact of the coronavirus outbreak.

MAS said the new funding for banks will support more stable USD funding conditions in Singapore, and facilitate USD lending to businesses here and the region. It will also contribute to global efforts by central banks to maintain stability and normal functioning of financial markets.

MAS will lend the USD obtained from the US central bank to banks in Singapore through its new MAS USD Facility, via auctions.

In the first auction, which will take place on Friday, March 27, US$10 billion in seven-day funds will be offered, which will cater to increased end-of-quarter demand for USD during this period.

MAS will conduct another two auctions on Monday, March 30, where US$12 billion in seven-day funds and US$8 billion in 84-day funds will be offered. After this, regular weekly auctions will be conducted every Monday.

Details on the auction schedule, as well as the terms and conditions for the facility can be found on the MAS website.

MAS said that it will continue to maintain a high level of Singapore dollar (SGD) and USD liquidity in the banking system through its daily money market operations.

“The MAS USD Facility complements and reinforces what MAS has been doing to ensure that funding to banks in Singapore remains ample so that they can play their role in providing credit to businesses and individuals,” said MAS in its statement.

It also urged banks in Singapore to avail themselves of the liquidity facilities provided so that they can better meet the USD funding needs of their customers in Singapore and the region.

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China Makes the Masks the World Needs. It Is Just Starting to Share.

Much as it dominates manufacturing of cars, steel, electronics and other necessities, China is essential to the world’s supply of protective medical gear. Most of what it makes are the disposable surgical masks worn by health professionals. It makes a smaller number of N95 respirator masks, which provide more filtration for doctors and nurses.

The general public does not need to wear masks, according to the U.S. Centers for Disease Control and Prevention. But demand for surgical masks has skyrocketed in China, where the police require anyone who goes out in public to wear a mask.

Though companies say China is claiming virtually all mask output, the Chinese government said it had never issued a regulation prohibiting mask exports and was willing to work with other countries to share.

“We fully understand the stress and problems that relevant countries are facing at this moment regarding the epidemic, and we are willing to strengthen international cooperation,” said Li Xingqian, the vice director of international trade at China’s Commerce Ministry, in a written reply to questions.

China did not just stop selling masks — it also bought up much of the rest of the world’s supply. According to official data, China imported 56 million respirators and masks in the first week after the January lockdown of the city of Wuhan, where the coronavirus emerged.

On Jan. 30, the last day for which data is available, China managed to import 20 million respirators and surgical masks in just 24 hours. Through February, civic-minded entrepreneurs and aid groups visited pharmacies in affluent countries and emerging markets alike, buying masks in bulk to send to China.

Global companies and charities donated, too. Honeywell provided 500,000 N95 respirator masks, and 3M donated a million of them. Honeywell said its contribution came from stockpiles in China, while 3M declined to identify the source of its donations.

3M also donated a second shipment of respirators, but declined to say how many that included. The charitable foundation of Bristol Myers Squibb funded an additional 220,000 N95 respirators for doctors and nurses at the center of the outbreak.

Since then, China has undertaken a mobilization of wartime proportions to expand its output of disposable surgical masks. Daily production soared from about 10 million at the start of February to 115 million at the end of the month, according to the Chinese government.

Yuan Fajun, the secretary general of the medical materials committee at the China Medical Pharmaceutical Material Association, said manufacturers still needed to produce another 230 million surgical masks for the domestic market. But the recent surge in production means that those orders can be met and exports should be possible, he said.

Hundreds of small companies have started making masks. A General Motors joint venture in southwestern China built 20 of its own mask-making machines and began bulk production.

Yet production of N95 respirator masks has barely increased, to 1.66 million per day. They require a special fabric that is in short supply.

China’s immediate needs may be easing. As new cases soar from Milan to Seattle, Wuhan is reporting fewer than a dozen new infections a day.

The Chinese government has begun some shipments to other countries as part of aid packages. It donated 250,000 masks last month to Iran, one of the countries hardest hit by the epidemic, and 200,000 to the Philippines. This week it said it would send five million masks to South Korea and export 100,000 respirators and two million surgical masks to Italy.

“In the previous stage of prevention and control, many countries have offered to help us, and we are willing to offer affected countries our share of help while we can,” said Mr. Li at the Ministry of Commerce in Beijing.

Analysts in the West say China is also looking for political influence by having top diplomats announce the donations. “It is certainly making it a tool of foreign policy,” said Jacques deLisle, the director of the Center for the Study of Contemporary China at the University of Pennsylvania.

China’s government is not the only one that has played a big role in mask allocation. Taiwan, South Korea and India have all taken steps to stop mask exports.

Citing shortages that endanger doctors and nurses, the French government last week requisitioned all mask production through the end of May. It is also pressing French medical supply factories to produce N95 masks and surgical masks around the clock for domestic use only.

Valmy SAS, a midsize medical supplies maker near Lyon, France, was unable to fulfill an order for a million masks by the British National Health Service because the French government requisitioned supplies. “They tell me what to make and I make it,” said Nicolas Brillat, the company’s director.

Germany and the Czech Republic last week banned the export of face masks and other protective equipment. In Italy, where the government has placed nearly all of the population on lockdown since Monday, masks and other protective medical supplies may not leave the country without authorization.

The governments did not give production numbers or say how many masks they needed to cover at-risk populations. But officials in Belgium, the Netherlands, Austria and other European Union countries warned that the curbs were preventing suppliers from delivering to neighboring countries.

The bans “risk undermining our collective approach to handle this crisis,” Janez Lenarcic, the E.U.’s crisis management commissioner, said on Friday at an emergency meeting of European health ministers in Brussels.

Supplies from a five-story building in southwestern Shanghai could help alleviate the shortage. The huge factory is one of the most important sites manufacturing N95 respirators for 3M.

Standing at the factory fence, which was topped with six strands of electrified wire, a worker who gave only his family name, Zhou, said the masks had been helping China fight the virus.

“They’re being sent,” he said with pride, “to hospitals in Wuhan.”

Keith Bradsher reported from Shanghai, and Liz Alderman from Paris. Abby Goodnough and Ana Swanson contributed reporting from Washington. Coral Yang contributed research from Shanghai, and Cao Li from Hong Kong.

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