An analysis and comparison of Singapore's macroeconomic data

1. Singapore:
A Macroeconomics case study
Adel RAHIMI
adel.rahimi@edhec.com

2. Table of Content
GDP Analysis
Monetary market
Inflation
Yield Curve
Stock Market
Loans
Real Estate
R&D
Composite Leading Index

3. GDP Per capita
As can be seen, Singapore GDP was
hit by COVID19 pandemic. The growth
rate for Q1 and Q2 2020 were both
negative. This pattern, however, is not
observed in the Q3 2020. The
economy is expanding and the growth
rate is nearly two digits. It is estimated
that the economy will grow almost 6%
in 20211.
1: https://www.channelnewsasia.com/news/business/singapore-2021-growth-forecast-mas-economists-upgrade-14373494
2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3
GDP Growth 1% -3% 2% 1% 1% -3% -12% 9%
-15%
-10%
-5%
0%
5%
10%
15%
Growth
Rate
Singapore GDP Per Capita Growth Rate

4. It is expected that the GDP
raise by 5%.
2021
The economy will almost recover and MAS will decrease the
monetary policy to increase trade. GDP growth 1%.
2023
MAS will increase the monetary policy
and open the economy. GDP growth 3%.
2022
GDP: Forecast
In this slide, I provide a timeline and the analysis for
the GDP growth for Singapore.

5. Monetary Policy
It can be observed that there is 55% correlation
between the two rates.
*Monetary Authority of Singapore
1: Singapore Dollar Nominal Effective Exchange Rate
2: https://www.mas.gov.sg/-/media/MAS/Monetary-Policy-and-Economics/Monetary-Policy/MP-Framework/StaffPaper37SEANZAexratev.pdf pp 8-9
3: Singapore Interbank Offered Rate
Note: Here we used USD, however, in reality MAS uses a basket of currencies.
1.26
1.28
1.3
1.32
1.34
1.36
1.38
1.4
1.42
1.44
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
2.00%
Jan
20
Feb
20
Mar
20
Apr
20
May
20
Jun
20
Jul
20
Aug
20
Sep
20
Oct
20
Nov
20
Dec
20
USD=SGD
SIBOR
rate
USD-SGD rate vs 3M SIBOR Rate
3M SIBOR Rate
USD-SGD Rate
Note: 55% correlation
Singapore has a unique exchange centered
monetary policy. This action is also called
S$NEER1. With this action MAS* does not have
control over the domestic interest rates2. Interest
rates in Singapore has always been under the
market expectations of S$ appreciations2.
MAS uses a basket of competitive currencies to
evaluate the rate of SGD. Therefore, we can see a
correlation between SGD-USD rate and SIBOR3.
MAS’s policy will be the same as 2008, meaning
the policy band will be set at 0% then increase
slightly.

6. Inflation
Singapore inflation has been quite volatile in the
past few years mainly due to 2008 financial crisis
and a slight peak in 2011 due to monetary
policies from MAS due to crisis in EU1.
1: MAS Gov: https://www.mas.gov.sg/annual_reports/annual20112012/cm.html
-1
0
1
2
3
4
5
6
7
8
Inflation Rate Poly. (Inflation Rate)
In the plot on the right, I have fitted a polynomial
line to the inflation rate to be able to predict the
inflation rate. As can be seen, the prediction is
that the inflation might rise in Singapore.

7. Composite Leading Index
Plotting Singapore’s Composite Leading Index, we
can infer that the expectations of economical
growth are very high and it is a good time to enter
the market in Singapore.
1: MAS Gov: https://www.mas.gov.sg/annual_reports/annual20112012/cm.html
Composite Index of Leading Indicators, is an index
composed of 10 economic components. It shows
the overall economic activities and performance
expectations of that country.
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2005
1Q
2006
1Q
2007
1Q
2008
1Q
2009
1Q
2010
1Q
2011
1Q
2012
1Q
2013
1Q
2014
1Q
2015
1Q
2016
1Q
2017
1Q
2018
1Q
2019
1Q
2020
1Q
Quarterly Composite Leading Index

8. Yield Curve
1: According to Standard and Poor’s rating, Moody's Investors Service, Fitch Ratings, DBRS
2: https://www.straitstimes.com/business/economy/in-a-world-of-negative-yields-singapore-sovereign-bonds-still-pay-interest
Singapore Government is AAA rated1
Singapore Government offers positive yields2
Singapore sovereign bond yield shows a
positive yield, meaning it is expected that the
economy grows. The suggestion for the
businesses is to start investing in Singapore.

9. $943,822 Million
Total Market Cap
SGX Market Size SGX is Singapore’s stock market and it is a relatively small
market comparing to larger economies such as NASDAQ.
51%
Overall Turnover Velocity
696
Total Number of Listed
Securities
Data from: SGX Market Statistics report, Mar 2021

10. SGX: Singapore Stock market
In this slide I compare volatilities in Singapore
(SG) stock market with Malaysia (ML) as a
neighboring country and Hong Kong (HK) as a
competitive country.
0
5
10
15
20
25
30
35
40
45
50
SG Volatility ML Volatility HK Volatily
It seems that Malaysia’s stock market is less
volatile than both Singapore and Hong Kong.
With recent events in Hong Kong, it has been
more volatile. Singapore, on the other hand,
has shown to be very stable. Considering the
advantages of Singapore dollars, it is highly
recommended to enter Singapore stock
market.

11. SGX: Singapore Stock market
0
200
400
600
800
1000
1200
1996-01-01
1997-01-01
1998-01-01
1999-01-01
2000-01-01
2001-01-01
2002-01-01
2003-01-01
2004-01-01
2005-01-01
2006-01-01
2007-01-01
2008-01-01
2009-01-01
2010-01-01
2011-01-01
2012-01-01
2013-01-01
2014-01-01
2015-01-01
2016-01-01
2017-01-01
Stock Market Capitalization to GDP
Singapore Hong Kong
Market Cap to GDP ratio is an important factor
to consider how much of the GDP growth is
part of the stock market. In this case, Hong
Kong has a larger market cap as it is
benefitting from Chinese companies that want
international exposure.
Singapore, on the other hand, has a small stock
exchange and a GDP comparable to Hong Kong’s.
Moreover, Singapore Exchange has tight
requirements which make some companies
voluntarily delist.

12. Credit Spreads
1: https://www.nikkoam.com.sg/articles/2021/credit-spreads-explained?highlight=WyJ6IiwiJ3oiLCJldGYiLCJldGYncyIsInN0aSJd
2: https://www.ocbc.com/assets/pdf/credit%20research/compendium/2020/singapore%20credit%20outlook%202020.pdf
As can be seen, Singapore and Hong
Kong are very similar in terms of credit
spread. In this case we can observe
that the spread in HK and SG are both
wide and this is a sign for lower bond
prices1.
0
1
2
3
4
5
6
2000 2005 2010 2015
Creadit Spread in percentage
Singapore Malaysia Hong Kong
With the current COVID-19 situation
analysts believe that credit spread will
be tightened2 and therefore, it might a
good time to issue bonds as a
company in Singapore.

13. Non-performing loans
1: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/singapore-s-banks-ease-provisioning-for-bad-loans-as-pandemic-abates-61125511
Percentage of non-performing loans can show
how the economy is moving. In our case, however,
we do not have the data to show post-COVID
loan performance. From 2010 to 2019, the figures
show a steady move and not surpassing the peak
in 2008 financial crisis. Judging from the news1 ,
the banks are easing loan provisioning in 2021.
Therefore, the amount might rise slightly but not
as high as 2008 crisis.
0
0.5
1
1.5
2
2.5
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Percentage of Non-performing Loans

14. Real Estate
*Singapore Interbank Offered Rate
Real estate market in Singapore is very complex
as the country does not have much land.
One interesting fact about SG real estate market
is that there exists floating interest rate loans.
These loans are pegged by SIBOR*. As SIBOR is
not directly controlled by the MAS, therefore real
estate loans are market expectations.
Most of the land is controlled by the government
through Housing Development Board and 99-year
lease.
0
50
100
150
200
250
Price
index
(100
at
2012)
Year
Housing Price Index
Singapore
Hong Kong
Comparing Singapore and Hong Kong in terms of
housing price index we can find out that both
countries were in the same level until Hong Kong
house prices soared after 2008. This might be due
to massive investments from mainland China.

15. Real Estate
All the government leased housings are controlled
by Housing & Development Board (HDB).
0.0
50,000.0
100,000.0
150,000.0
200,000.0
250,000.0
2005
1Q
2006
1Q
2007
1Q
2008
1Q
2009
1Q
2010
1Q
2011
1Q
2012
1Q
2013
1Q
2014
1Q
2015
1Q
2016
1Q
2017
1Q
2018
1Q
2019
1Q
2020
1Q
Housing Mortgage (in Mil Dollars)
Financial Institutions Housing & Development Board (HDB)
HDB provides loans with low down payment and
long-term lease options.
As the plot shows, there is a slight decrease in
HDB loans and a hyper growth in the financial
institutions' mortgages.
It is highly suggested that financial institutions
start to offer real estate loans as it is very
lucrative.

16. Research and Development
R&D expenditure in Singapore has risen since
2005.
Most of the Multi-National Companies (MNCs)
have an R&D center in Singapore (including P&G-
where I work, FedEx, Microsoft, Amazon, Google
etc.)
Approximately, 62% of Singapore’s R&D
expenditure is in the area of Engineering and
Technology.
0
2,000
4,000
6,000
8,000
10,000
12,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Total R&D Expenditure

17. It is highly suggested for financial institutions to offer mortgage loans
as the market is growing rapidly.
Considering Singapore’s large investments in R&D for Engineering
and Technology research area, it is highly recommended that
companies in this sector establish their R&D labs in Singapore.
Action Plans
As Singapore is not involved in Agriculture and Food Sciences R&D, it
is not recommended for the related companies to view Singapore as
a potential R&D center.

18. As a company it is highly suggested that you enter Singapore market.
The GDP growth expectations are high and the economy is
expanding. It is a good time to be present in Singapore.
Considering monetary market, Singapore has a free market and the
interest rates are based on market expectations. With the current market
expectations, the rates for SIBOR are low (0.4%) and therefore, it is a good
time to get short term loans that are pegged by SIBOR.
Action Plans
Inflation in Singapore is expected to rise, and therefore, it is
recommended to convert liquidity to assets or convert cash to other
currencies.
It is important to highlight the positive yield curve and future
expectations. As the curve has an upward trend, it shows that the
government is expecting a recovery from the COVID-19 market crash.