Money markets in singapore vis a-vis in india


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Money markets in singapore vis a-vis in india

  1. 1. Money Markets in Singapore vis-avis Money Markets in India Surbhi Soni Roll no. 876 BBA-LLB(hons.)
  2. 2. Financial Market Capital Market Money Market
  3. 3. Money Market  Money Market one of the sections of a financial market where securities and financial instruments with short-term maturities are traded is called the money market. Financial assets like treasury bills, certificates of deposits, commercial paper and bankers' acceptance are some of the short-term debt securities traded in the money market.  The maturity period of these instruments may range from overnight to an year.  The Government and Businesses resort to money market to manage their Short-term cash needs.  Hence, it is considered to be the Best source to invest in liquid assets.
  4. 4. Money Market in Singapore  In Singapore, the money market consists of various banks and financial institutions and is regulated by the Monetary Authority of Singapore (MAS).  The Singapore money market consists of various liquid and short-term borrowing and lending. Some of the money market instruments in the market are: Treasury Bills, commercial papers, certificate of deposits, etc.
  5. 5. Money Market Instruments Treasury Bills Certificate of Deposits Commercial Papers Banker’s Acceptance Repurchase Agreements
  6. 6.  Treasury Bills  Treasury bills are sold at a price less than their par value. When they mature, the issuer will pay the holder of the T-bill an amount equivalent to its par value.  T-bills don’t pay out interest. Instead, the interest is included in the price discount. Hence, the 'interest' earned on them is the difference between the purchase price and its par value.  On behalf of the Singapore Government, the Monetary Authority of Singapore issue T-bills of 3month and 1-year maturities.  Both Singaporeans and foreign residents can invest in treasury bills. There are also no restrictions to non-
  7. 7.  Treasury Bills  Treasury bills are denominated in nominal values of SGD1,000 and traded at a rate of discount basis.  You can sell your T-bills before maturity but the price will be subjected to market forces.
  8. 8.  Certificate of Deposits  In Singapore, Certificate of Deposits are called Singapore Dollar Negotiable Certificate of Deposits. It is a financial instrument usually in bearer form issued by a bank acknowledging the deposit of a specific sum of money for a fixed period of time at a fixed rate. It is issued in Singapore dollars.
  9. 9. Primary Issuers (Banks) Certificate of Deposits Market Secondary Market (Dealers) The Depositors (the investors)
  10. 10.  Commercial Papers  There are many commercial banks in Singapore which issue Commercial papers for: 1. 3-months: Average Yield Percentage (APY): 0.08% to 0.35%. 2. 6-months: APY ranges from 0.10% to 0.5%. 3. 1 year: APY ranges from 0.10% to 0.75%.  Some of the major players are: Maybank Singapore, Standard Chartered Bank Singapore, OCBC, UOB Singapore, HSBC Singapore, Citibank Singapore, etc.
  11. 11.  Banker’s Acceptance  A short-term debt instrument issued by a firm that is guaranteed by a commercial bank. Banker's acceptances are issued by firms as part of a commercial transaction. They are traded at a discount from face value on the secondary market, which can be an advantage because the banker's acceptance does not need to be held until maturity. Banker's acceptances are regularly used financial instruments in international trade.  These are considered to be relatively safe investments, since the bank and the borrower are liable for the amount that is due when the instrument matures. This is especially useful when the creditworthiness of a foreign trade partner is unknown.
  12. 12.  Banker’s Acceptance  The Maturity period generally ranges from 30 days to 180 days from the date of issue.
  13. 13.  Repurchase Agreements  Repurchase transactions, called Repo or Reverse Repo are transactions or short term loans in which two parties agree to sell and repurchase the same security. They are usually used for overnight borrowing.  Under the agreement the seller sells specified securities with an agreement to repurchase the same at a mutually decided future date and price. Similarly, the buyer purchases the securities with an agreement to resell the same to the seller on an agreed date at a predetermined price. Such a transaction is called a Repo when viewed from the perspective of the seller of the securities and Reverse Repo when viewed from the perspective of the buyer of the securities
  14. 14.  Repurchase Agreements in Singapore:  Singapore has an active repurchase market. It’s size is approximately S$25 million.  There are two types of repurchase agreements in Singapore: 1. 2.  general collateral repurchases, and specific repurchases. The Monetary Authority of Singapore (MAS) adopts the Public Securities Association (PSA) or International Securities Market Association (ISMA) Global Master Repurchase Agreement in relation to repurchase transactions.
  15. 15.  Repurchase Agreements in India:  In India, Repo/Reverse Repo transactions can be done only between the parties approved by RBI and in RBI approved securities viz. GOI and State Govt Securities, T-Bills, PSU Bonds, FI Bonds, Corporate Bonds etc
  16. 16. Comparison of Singapore Money Market with Indian Money Market  The Reserve Bank of India is the regulator of money market in India. The Singaporean money market is regulated by the Monetary Authority of Singapore.  The rates of the money market in Singapore are regulated by the MAS, in India however, the rates are determined by the market forces.  The Singaporean Financial market (including the money market) is highly developed. The Indian money market is in a relatively nascent stage.  Both the Indian and Singaporean Money Markets offers a variety of money market instruments.
  17. 17.  Thank You!