Discuss About The Market Overview Of The Debt Of Singapore?
This report has been prepared in order to get a clear idea of the operations of the debt market in Singapore in the present time period. Among the global economic decline, it has been observed that there has been a drop in the debt issuance globally by 13% in the year 2015. This fall has been higher in the Asian countries where the percentage has been around 43% for local currency issuance and the G3 issuance fell by 13% (Room 2017). Yet the Asian bonds have seen a growth as an asset class, which has been a significant result.
Even though the long-term financial problem of Asia has not changed as there have been the existent of positive economic prospects emerging middle class and urbanisation, but sloth growth of the economy will not only diminish the entry of new debt firms to increase growth but would even have an impact on the ability of the companies to refinance their current existent debt (Agarwal and Qian 2014). The debt market of Singapore has even faced the problems that have been discussed as various issues have been raised with respect to the oil and gas sector with respect to their financial difficulties. This paper will therefore analyse the debt market of Singapore so that a clear idea about the debt market can be understood.
Analysis of the Debt Market
Corporate Debt Market
In the year 2015, the new corporate debt issuance became sluggish to SGD 174 billion as the economic viewpoint for the developing economies diluted and the course for the monetary policies in the developed economies became more uncertain.
By not bearing the lower new issuance amount, the total outstanding debt has a rise by 2% every year to reach SGD 315 billion due to a certain amount of maturing issues. The outstanding SGD debt had reached SGD 140 billion while the non-SGD debt was valued at SGD 175 billion (Room 2017).
The financial companies that have been rated well sustained to play a significant role in the expansion and the development of the debt capital market of Singapore. For example, the Korea Development Bank had collected more than SGD 450 billion during the year in Dollars and in SGD and three local banks of Singapore issued SGD 12 billion altogether. The debt market looks to have improved in the year 2016. During the first six months the corporate debt issuance amount had a rise by 12% with respect to the similar period in 2015. There have been various new development opportunities like the covered bonds and green bonds that can add up to higher diversity to the offering of the product in the market of Singapore (Kalotychou, Remolona and Wu 2014).
Issuers and Issuances
Being an international hub for fixed income, the foreign and the local issuers can raise the non-SGD and the SGD investment in Singapore. The non-SGD corporate debt of issuance has been found to be 85% of the overall debt issuance in the year 2015, which has underscored strong international features of the corporate debt market of Singapore.
The market of SGD corporate debt sustained to attract a diversified range of financial issuers in the year 2015. The finance companies consist of 30% of the issuance amount, which was 19% in the previous year (Room 2017). The various other classes of issuers include government agencies, property corporate, non-corporate components etc.
The local issuers have still remained the important players in the Singapore market. The Land Transport Authority has been found to be the largest non-financial company of issuer and has gathered overall SGD 2.5 billion in 2015.
The debt market of Singapore has still been an attractive area for the issuances in the foreign currencies. The Non-SGD debt issuance has been around 85% of the overall debt issuance, which has been lower than the previous year. The availability of a firm worldwide base of investors that consists of the insurance and bank companies and fund managers have assisted the requirement for non-SGD denominated debt (Jiang, Phillips and Yu 2015).
The re-issuances have continued to be the significant driver for the volume of issuance that contributes to over 90% of the overall volume in the year 2015. The earlier success of issuance has motivated many corporate firms to issue the same in the debt market of Singapore again. With reference to the sluggishness in the corporate debt market, the number of maiden and repeated issuers has decreased in the year 2015. On an aggregate point of view, the overall number of issues who were tapping the market in 2015 have been greater than the average over the last four years, which reveals that the sustainable significance of the corporate debt market in allocating the need of funding of the local organizations (Amiraslani et al. 2017).
In order to make the issuance more colourful and attractive, the Asian issuers in order to increase the international capital in Singapore have disclosed that they would introduce Asian Bond Grant scheme in 2017. This scheme has the plan of expanding the base of the issuers in the bond market of Singapore, which would lead to addition of diversity and breadth of the debt instruments for the investment society (Farooq, Ahmed and Saleem 2015). There have been a larger extent of investors who hail from various investment profiles have been associated in the debt market and each one of them have contributed significantly that have led to the development of the corporate debt market of Singapore.
The analysis of the debt market of Singapore has revealed that the market has been developing significantly from the previous year and the international issuers have shown greater interest in investing in the debt market. Even thought the worldwide debt market has become sluggish during the present time period, the debt market of Singapore has been moving ahead with respect to the global market. The intermediaries and the infrastructure has a crucial role to play as an effective infrastructure would attract the investors in the Singapore market. It is anticipated that the Singapore market would improve the coming years as well.
Agarwal, S. and Qian, W., 2014. Consumption and debt response to unanticipated income shocks: Evidence from a natural experiment in singapore. The American Economic Review, 104(12), pp.4205-4230.
Amiraslani, H., Lins, K.V., Servaes, H. and Tamayo, A., 2017. A Matter of Trust? The Bond Market Benefits of Corporate Social Capital during the Financial Crisis.
Farooq, S., Ahmed, S. and Saleem, K., 2015. Overinvestment, Growth Opportunities and Firm Performance: Evidence from Singapore stock market. Corporate Ownership & Control, p.454.
Jiang, L., Phillips, P.C. and Yu, J., 2015. New methodology for constructing real estate price indices applied to the Singapore residential market. Journal of Banking & Finance, 61, pp.S121-S131.
Kalotychou, E., Remolona, E.M. and Wu, E., 2014. What makes systemic risk systemic? contagion and spillovers in the international sovereign debt market.
Room, R. 2017. Monetary Authority of Singapore (MAS). [online] Mas.gov.sg. Available at: [Accessed 12 Aug. 2017].