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Ravi Menon says record inflows can be managed

Bloomberg
Bloomberg11/2/2022 09:34 AM GMT+08  • 3 min read
Ravi Menon says record inflows can be managed
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Singapore can absorb record inflows of new money, the central bank chief said, allaying concerns of a real estate bubble even as rents and prices surge to unprecedented highs.

The Asian financial hub attracted $448 billion last year, 15.8% higher than the previous year, the latest data from the Monetary Authority of Singapore show.

Ravi Menon, managing director of Monetary Authority of Singapore, speaks during an interview in Singapore, on Wednesday, Oct. 26, 2022. According to Menon, Southeast Asia has done a “decent job” of allowing markets to absorb some shocks from an aggressive US monetary tightening while ensuring that currency weakness doesn’t spiral out of control.

“When a large sum of money comes in to any country, you should be worried about it,” MAS Managing Director Ravi Menon said in an interview with Bloomberg Television’s Haslinda Amin.

One such concern is flows into the property market driving up prices. Rather than blocking money coming in, the regulator has imposed measures on the real estate sector to prevent overheating. “We’ve got that under control,” he said.

Singapore’s efforts to build an international wealth hub are paying off as the city enjoys a post-Covid resurgence, attracting investors drawn to its stability. Assets managed by local firms soared 16% in 2021 to US$4 trillion, mostly from overseas, exceeding the global growth rate. Investors from US hedge-fund titan Ray Dalio to Indian billionaire Mukesh Ambani are setting up offices to manage their personal wealth.

See also: Singapore may need to re-evaluate tax incentives in post-BEPS 2.0 world: Deloitte

The housing market has defied a slump reported in other major markets including Australia, Hong Kong and Canada. As prices jumped 7% in the first nine months -- including a sizzling 13% in the third quarter alone -- the government took steps to cool the market. Landlords meanwhile are asking tenants for big rent increases, sometimes as much as double, when they extend leases.

The inflows, which are roughly three quarters of Singapore’s nominal gross domestic product, come on top of gains from higher asset prices last year, according to the central bank. The assets are helping to boost the financial hub as it seeks to add as many as 20,000 finance jobs over five years, in areas including wealth management and sustainable financing.

Menon said money is coming from growing wealth across Asia, where the rich are seeking a place to invest. He acknowledged that North Asia’s affluent contribute a large portion of asset flows into Singapore.

See also: Analysts expect Singapore's industrial production to remain soft in 1Q2023

“They are richer, they have more investible assets,” he said, speaking ahead of Singapore’s FinTech Festival that starts on Wednesday.

In China, Asia’s largest wealth market, assets plummeted following the Communist Party congress, where President Xi Jinping solidified his grip on power.

Asked whether China may see accelerated capital outflows, Menon said it’s too early to tell.

“There’s already some happening,” he said. “Some of it have come to Singapore, you would have seen in the last few years. I am not sure we are looking at any marked pickup.”

In the meantime, Singapore’s capital and financial markets, as well as its banking system, are deep and liquid enough to handle large fund flows, he said. MAS, which also serves as financial regulator, is strict when it comes to illicit fund flows, repeatedly reminding financial institutions to be on guard, Menon said.

“There’s so much money coming in, you can choose,” he said.

Other interview highlights:

MAS has been focusing on strengthening disclosure rules by listed companies to deter firms from misconduct

Singapore is not aiming to become a cashless society even though digital payments are becoming common

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