S&P affirms AAA rating for Singapore

by Yvonne Chan
04:46 AM Aug 26, 2011


SINGAPORE - The Republic, being the only country in Asia to hold the Standard & Poor's top-level triple-A credit rating, may be suffering from the strength of its reputation as a safe haven with hot money headed this way.

The ratings agency yesterday affirmed its AAA rating and stable outlook for Singapore's long-term debt, citing its "extensive fiscal and external strengths, and its solid record of prudent macroeconomic management".

It is difficult to say how much hot money there is in the system but a recent study by a local bank notes that the country has the highest percentage of foreign reserves compared with places such as Malaysia, China and Hong Kong.

Up to 44 per cent of Singapore's GDP in the first half of this year comprised foreign reserves (including spot and forward purchases). This compares with Malaysia's 28.4 per cent, China's 12.1 per cent and Thailand's 10.4 per cent.

DBS economist Irvin Seah: "With inflows, you can expect the Singapore dollar to certainly appreciate. Our expectation is that Singapore dollar will register S$1.19 against the US dollar by the end of the year and S$1.17 by mid next year."

With the possibility of a third round of quantitative easing in the United States, there are expectations of even more hot money coming this way. NTU associate professor of economics Paul Yip believes that the first and second round of quantitative easing by the US had created a lot of damage.

"Our banking system is flooded with liquidity, with very low interest rates. And all this has fed into the rise in property prices," he said. He recommended that the Government consider austere measures, including an incremental mortgage rate tax, to curb demand.


Via: http://www.todayonline.com/Business/EDC110826-0000314/SP-affirms-AAA-rating-for-Singapore

References:
http://theedgesingapore.com/the-daily-edge/business/32181-singapore-bonds-attract-schroder-with-asias-sole-aaa-ratings.html
http://www.chinapost.com.tw/business/asia/singapore/2011/08/29/314903/Singapore-to.htm