Briefs

The Monetary Authority of Singapore (MAS) has announced the establishment of a US$60 billion ($86 billion) swap facility with the US Federal Reserve, as part of coordinated central bank actions as global financial markets threaten to collapse under the strain of the Covid-19 pandemic.

On March 15, the Federal Reserve had announced the enhancement of the standing US Dollar (USD) liquidity swap line arrangements with five other central banks — the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank.

This was aimed at easing strains in the global USD funding markets.

The Federal Reserve extended the USD liquidity swap line arrangements to nine additional central banks, including MAS, on March 19.

MAS says the swap line arrangements will “contribute significantly” to ensure stable liquidity conditions in the USD funding markets in Singapore and globally.

The Singapore central bank says it intends to draw on this swap facility, which will be in place for at least six months, to provide USD liquidity to financial institutions in Singapore.

MAS will work out the operationalisation of the facility in consultation with the Federal Reserve, and will provide details this week on how it will be implemented in Singapore.

The swap facility complements MAS’ management of the Singapore Dollar (SGD) market.

Through its market operations, MAS will continue to provide ample SGD liquidity to support the needs of the banking system.

In addition, the MAS Standing Facility is available for all eligible banks to deposit or borrow SGD funds against specified collateral.

“These measures will reinforce the stability of the financial system in Singapore and support its role in providing credit and essential financial services to the economy,” MAS says in a statement.— Stanislaus Jude Chan

Global economy headed for recession in first half of 2020: Morgan Stanley

The Covid-19 outbreak has now moved on to Europe and the US, after rattling the Asian stock markets. This, according to Morgan Stanley, is a sign that a global recession in 2020 is inevitable.

According to Chetan Ahya, chief economist and global head of economics at Morgan Stanley, the economic damage of the spread will be “severe” — and that’s putting it mildly.

“This time will be worse than the global recession of 2001,” says Ahya.

“While the policy response will provide downside protection, the underlying damage from both Covid-19’s impact and tighter financial conditions will deliver a material shock to the global economy,” he adds.

Meanwhile, Morgan Stanley’s US biotech analyst Matthew Harrison estimates that new coronavirus cases are likely to peak only around the second half of April or May, on the basis that public and private sectors chip in with a meaningful health policy response.

The way Ahya sees it, China should see the impact of the virus in 1Q2020, while the rest of the world can expect a slightly delayed impact in 2Q2020.

“We think combined monetary and fiscal easing will help to revive the global economy from 3Q2020, while a contraction in y-o-y growth in 1H2020 will still be inevitable,” says Ahya.

He urges investors to brace themselves for further dislocations in the financial markets.

“Global recession will seriously damage corporate profitability and impair balance sheets, triggering corporate credit risks and further damaging the cycle,” says Ahya. “Investor uncertainty and anxiety has produced serious dislocations in financial markets, particularly credit.”— Uma Devi

Singapore beats expectations to register NODX growth in February

Defying expectations of a slowdown from the Covid-19 outbreak, Singapore’s non-oil domestic exports (NODX) reversed out of the red in February following a growth in both electronics and non-electronics shipments.

Official figures released by trade agency Enterprise Singapore on March 17 pointed to a 3% y-o-y growth in February, compared to a 3.3% decline in the previous month.

Singapore’s February export figures also beat the 4.6% decline forecast by private-sector economists in a Bloomberg poll.

Specifically, the increase was led by a 3.2% increase in non-electronic exports on the back of increases in the export of specialised machinery, pharmaceuticals, and non-electric engines and motors.

Meanwhile, electronic exports were up by 2.5% on higher exports of disk media products, capacitors and parts of integrated circuits.

Economists attributed the y-o-y increase in February to a low-base effect, as Lunar New Year fell in February last year.

Aside from this, they note that the economies of the US and Europe — two of Singapore’s key trading partners — have not yet felt the effects of Covid-19 in February.

“The rapid spread of the virus outbreak in Europe and the US will likely hurt global demand,” say Maybank Kim Eng economists Chua Hak Bin and Lee Ju Yu.— Amala Balakrishner

SGX RegCo urges companies to adopt digitals tools, other measures in AGMs

Singapore Exchange Regulation (SGX RegCo) has announced guidelines on measures which issuers could adopt when holding general meetings amid the Covid-19 pandemic.

In a regulatory announcement on March 19, SGX RegCo said issuers may arrange to segregate attendees across various venues, such as in separate rooms in the same building.

This is so that each venue would hold fewer than 250 persons, in line with an earlier advisory from the Ministry of Health on social distancing.

Seats in the venue should be placed at least one metre apart from one another, SGX RegCo said.

To allow attendees at each venue to participate in the annual general meetings (AGMs), SGX RegCo said issuers could provide video links to help facilitate participation.

In addition, SGX RegCo said issuers should publish minutes of the AGMs on its website, including responses from the board of directors and management to substantial queries and relevant comments from shareholders.

“Issuers are encouraged to adopt further digital tools for the conduct of their general meetings, and SGX RegCo stands ready to work with them,” the market regulator said.

Already, some SGX-listed companies and associations have welcomed the guidelines.

“The safety and health of our shareholders is of top priority to us. We therefore strongly encourage our shareholders to use the options that we will be availing to them to participate in the meeting without attending it in person,” says Koh Ching Ching, head of Group Brand and Communications at OCBC Bank.

OCBC, which will be holding its AGM on April 30, says some of the options it is exploring include a live webcast of the proceedings of the meeting, and allowing shareholders to appoint the chairman of the meeting — OCBC Bank chairman Ooi Sang Juang — to act as their proxy to direct their votes.

“The Singapore Exchange Regulation’s proactive response continues to speak well of Singapore regulatory agencies’ nimbleness in managing crisis situations,” says Harold Woo, president of the Investor Relations Professionals Association (Singapore) (IRPAS).

“In short, SGX recognises that shareholder voting is a crucial pillar of the corporate governance process, and this guidance ensures that AGMs are robustly conducted yet within the precautionary measures that have been instituted by the government,” he adds.— Stanislaus Jude Chan

SGX to prioritise keeping markets ‘available and accessible’ amid outbreak

The Singapore Exchange (SGX) said it is committed to keeping its markets open, even as the Philippine Stock Exchange on March 17 suspended trading amid the Covid-19 pandemic.

The Philippines shut down its equity, currency and bond markets after Manila expanded a month-long lockdown of the capital region to contain the coronavirus outbreak.

The country is the first to halt trading, after Philippine equities tumbled more than 30% this year — among the biggest declines in Asia.

The Philippines’ move has prompted speculation that other countries may follow suit to stem plunging stock prices, on the back of heightened fears of a global recession.

Investors in Singapore, however, have little reason to worry at this point that financial markets here will be shutting down.

“Our priority is to ensure that our securities and derivatives markets are always available and accessible,” says an SGX spokesman in response to questions from The Edge Singapore.

“We are committed to ensuring that our trading, risk management and clearing capabilities are robust, especially in these volatile times.” “We have taken a holistic approach to maintain a safe working environment and strengthen resiliency,” the spokesman adds.

Even as shutting down of the stock exchange might be seen as an extreme measure, some market experts have voiced their support for the move in the Philippines.

For now, however, it seems SGX is on the right track with its decision to keep the markets open.

When Philippine stocks resumed trading on March 19 following the controversial two-day shutdown, the index posted its biggest intraday-loss in 33 years.

The Philippine Stock Exchange Index opened with a 24% drop in Manila, bringing this month’s loss to about 40%.— Stanislaus Jude Chan

66 parties file proofs of claim worth $3.1 bil against Hyflux

Embattled water treatment company Hyflux saw a total of 66 companies file proofs of claims, the company reported on March 18.

The amount claimable totalled to a whopping $3.1 billion. The natures of these claims ranged from syndicated loans and professional services, to preference shares and bank guarantees.

The group had called for investors to file proofs that set out their claims for the purpose of the scheme meetings to vote on the Utico plan on Jan 9.

Parties who had claims against Hyflux, Hyflux Engineering, Hyflux Membrane Manufacturing (Singapore) and Hydrochem (Singapore) were asked to file them by 5pm on Feb 5. This deadline was later extended on two separate occasions to Feb 27, and then March 11 thereafter.

These proofs would then form a basis for the creditors, which include bank lenders and trade creditors, to vote on the scheme proposals and to receive payments.

Among the claimants were DBS and Standard Chartered, which claimed amounts of $98.7 million and $76.7 million, respectively.

Mizuho Bank, too, has filed claims worth $193.7 million, citing a combination of syndicated and bilateral loans as well as project delivery guarantees.

In March 2018, when a $530 million investment from Indonesian investment group Salim-Medco was still on the table, some 73 parties had filed proofs of claim amounting to $3.51 billion.

Debt-laden Hyflux owes $900 million in perpetual securities and preference shares (PnP) principal value to some 34,000 mom and pop investors who have been left in the lurch with little hope of recovering their investments. — Uma Devi