Singapore Money Market Behavior Money market behavior in Singapore can be affected by a lot of economic factors. Singapore money market often called Singapore Interbrain Offered Rate (SKIBOB). Monetary policy was the first factor that can affect SKIBOB. Monetary Authority of Singapore has a duty to promote the stability of price that will support Singapore economic growth (Monetary Authority of Singapore 2012). Then, the next factors that affect SKIBOB were the strength of Singapore Dollars and the level of inflation (Appendix 1).
We will explain about the Singapore money market rates behavior over he past three years (2010, 2011, and 2012) and we will try to predict it over the six months. At the end of 2010, Singapore money market had been disturbed by China government bonds and it made economy boosted globally. Investors had the positive reaction due to the China’s bonds rating and the positive increase in global markets. It made the high positive for all commodities and related currencies (Kumar, 2010).
Then, large banks (e. G. Citibank) were initiated right issues to increase the funds to ensure that they can maintain the growth and take taking all the positive opportunities. They were preparing the new set of capital to increase capital requirements. They were hoping to be dodging the financial crisis (Kennedy, 2010). At the beginning of 2010, Singapore was in affection of Lehman Brother’s failure and bankruptcy. Lehman brother’s failure and bankruptcy was a decrease in global interbrain rate.
Based on our observation, the global economy was slowed down and the central bank was attempted to bought back government bonds, printed more money, and purchased financial assets in order to increased money supply as well as reserved in the bank itself. Therefore, Singapore interest rate was continuing dropping because there was not much investor interested in investing in Singapore. In the SQ of 2010, the interbrain rates were decreased sharply from 0. 44%, 0. 69%, and 0. 75% (IQ) to 0. 38%, 0. 56%, and 0. 63% (SQ).
BY the end of SQ of 2010, the 3 month rate were declined slightly to 0. 5% while the 1 month and 6 month interbrain rates were steady same. There was a significant changing at the end of SQ as the rates were decreased slightly from 0. 38%, 0. 5% and 0. 63% to 0. 31 0. 44%, and 0. 56% respectively. The interbrain rates for the year 2010 were continuing decreased. It happened because of Singapore economic growth was 14. 5% and the inflation rate was 0. 6% (Monetary Authority of Singapore 2012). The rates were stabilized and remained the same until the end of SQ of 2011.
The interbrain rates were decreased and it reached the lowest percentages by 0. 19%, 0. 25%, and 0. 31%. In 2011 Singapore economy increased by 4. 9% and the inflation rate was 5. 2%. However, Singapore was escaped recession and the economy increased in 2011, we predicted that in 2012 the Singapore economy will be falling down. Declining in export import section is the main factor that caused the Singapore economy will decrease. Singapore economic expansion could be slowed down in 2012 and it has impact for the consumer response.
The entire Singapore citizen will not purchase any expensive things (Adam and Tan 2011). Therefore, the rates were changed at the end of 2011. The rates were increased to 0. 31%, 0. 38%, and 0. 44%. There was no changed until SQ tot 2012. The interbrain rates were remained the same state (Monetary Authority tot Singapore 2012). Changes in Singapore Interbrain Offered Rate (SKIBOB) can be caused by many factors. It is when government of Singapore gives new bank customers extra bonus regarding money. Government uses this strategy in order to pull more customers particularly Singapore citizens.
In our opinion, Singapore government will be pushed to do this strategy to attract new customers; hence there will be an increase in money supply and in contrast a decrease in interest rate. However, the economic condition in Europe is still not stable as a result of the recession recently that lead to financial stress. The crisis affects most of the world including Asia. As a county with the highest rate of business activities among countries in South East Asia, Singapore also affected by crisis in Europe.
Europe crisis lead to some condition such as tightening credit condition, and in the United State, it is predicted that private consumption will be low. As the demand in economy is reduced, there is excess is supply which causes economy surplus. As a result, the global market is slowing down and this also happened to Singapore. Before the crisis in the first half of 2013, Singapore has GAP of 4. 2% which is a good sign of economy growth. However, in the next second half of the year, after the crisis, this growth in GAP is slowing down until early 2013.
The whole economy is gradually declined and most of business in major countries does not do well. Based on our observation, we made prediction for the next 6 months. We expected that by the end of 2013, Singapore GAP growth will fall from 4. 409% to 4. 295%. However these figures are only the annual percentage of constant price GAP, the real GAP is forecasted to rise to SAG 325,866 billion. This will result in decreasing inflation growth rate by the end of 013, from 3. 142% to 1 . 758%. Another factor that affects Singapore economy is that the economy in China is going down.
As there is trade in tourism sector between Singapore and China, the decline in China economy is not a good sign for Singapore. We predicted that interest rate will shrink in the next 6 months. Based on our evaluation, unconventional purchases of asset has been initiated by American Federal Reserve through the central bank by declaring a third round purchases of assets to lower interest rate on long run. In additional, we also evaluated property racket condition in 2013. Most people borrow money to buy property or to pay for their mortgage.