Quoteworthy: "I almost thought I was at the wrong place because it felt like a rock concert." — Deputy Prime Minister Lawrence Wong during his opening speech at the Singapore FinTech Festival 2022
Powell: Smaller rate hikes ahead
Federal Reserve (Fed) Chair Jerome Powell left little doubt that he is prepared to push rates as high as needed to stamp out inflation, even as the central bank eyes a downshift to a slower pace of increases.
Addressing reporters on Nov 2 after the Fed raised rates by 75 basis points for the fourth time in a row, Powell says: “Incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.”
The move lifts the Fed’s benchmark from 3.75% to 4%, from nearly zero in March. Even so, the US economy has shown remarkable resilience: Rising borrowing costs have slowed the housing market, but the inflation rate is stubbornly stuck near 40-year highs. “We think that we have a ways to go; we have some ground to cover with interest rates before we get to that level of interest rates that we think are sufficiently restrictive,” Powell adds, warning investors that the tightening campaign was not over.
“It is very premature to be thinking about pausing,” he continues, noting it could be appropriate to slow the pace of increases “as soon as the next meeting or the one after that.”
See also: ECB delivers landmark rate cut but few signals top
US stocks reversed initial gains, with the S&P 500 suffering its worst rout on a Fed decision day since January 2021 as investors digested the message. Powell’s challenge was to signal a shift to a slower pace of hikes without communicating that the Fed was close to done with the tightening campaign. He accomplished that by declaring rates would peak higher than officials expected in September, even as they slow the pace of their increases as they get closer to that destination.
His remarks shift the focus away from the size of the next rate hike to where they will peak and how long they will have to stay at those levels. The term “sufficiently restrictive” was new in the Federal Open Market Committee’s (FOMC) statement. It was balanced by saying the pace of future increases “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
The FOMC vote was unanimous, and some economists said the statement was a compromise to prevent dissents. Powell, however, was careful to spell out that this did not represent any retreat in the war on inflation. He noted that, if anything, the risks were higher of doing too little than too much.— Bloomberg
See also: ECB holds rates and signals cuts are still some way off
Singapore’s inflows can be managed
The central bank chief says that Singapore can absorb record inflows of new money, easing 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 (MAS) show.
In a recent interview, MAS director Ravi Menon says 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 into any country, you should be worried about it,” Menon tells 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 says.
Singapore’s efforts to build an international wealth hub are paying off as the city enjoys a post-Covid-19 resurgence, attracting investors drawn to its stability. Assets managed by local firms soared 16% in 2021 to US$4 trillion ($5.6 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.
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. Meanwhile, landlords ask tenants for significant rent increases, sometimes as much as double, when they extend leases.
The inflows, 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 wealth management and sustainable financing.
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Menon says the money comes from growing wealth across Asia, where the rich seek a place to invest. He acknowledged that North Asia’s affluent contribute a large portion of asset flows into Singapore. “They are richer; they have more investible assets,” he adds, speaking ahead of Singapore’s FinTech Festival that starts on Nov 2.
In China, Asia’s largest wealth market, assets plummeted following the Communist Party congress last month. Menon adds it is too early to tell if China may see accelerated capital outflows. “There’s already some happening,” he says. “Some of it has 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, he said that Singapore’s capital and financial markets, as well as its banking system, are deep and liquid enough to handle large fund flows. Menon says that MAS, which also serves as a financial regulator, is strict regarding illicit fund flows, repeatedly reminding financial institutions to be on guard. “There’s so much money coming in; you can choose.” — Bloomberg
DBS to tap into new digital asset platform
On Oct 28, DBS Group Holdings announced that it is the first bank to tap into the MaxxDigital solution to enhance its digital asset trading business. The move will enable the bank to provide straight-through trading from Request for Quote (RFQ) through to trade settlement on a 24/7 basis.
MaxxDigital by MaxxTrader, a Singapore Exchange (SGX) Group company, is a new digital asset trading solution to trade digital assets with top-tier market makers.
In a MaxxTrader press release, the company said it has a strong global client and dealer franchise, with over 100 global and regional banks, broker-dealers and hedge funds currently trading on its platform. Through its MaxxDigital solution, MaxxTrader says it aims to “address legitimacy and stability concerns among digital assets communities regarding trading counterparties and technology partners”.
MaxxDigital can price, trade and distribute any cash or tradeable tokenised digital assets. It aims to solve the current execution challenges in digital asset trading by introducing market-proven TradFi best execution. The solution also incorporates state-of-theart over-the-counter (OTC) foreign exchange (FX) execution features for digital assets trading, streaming, Request for Stream (RFS) and Request for Quote workflows.
MaxxTrader CEO Manish Kedia says there is currently a large gap in the digital assets trading market for a robust, functionality-rich trading solution. “We believe that MaxxDigital can fill this critical gap. MaxxTrader brings over two decades of experience in TradFi solution expertise and know-how into digital asset trading, which will help support and empower both TradFi and Crypto native institutions in optimal execution of their operations.”
Jacky Tai, managing director and group head of trading and structuring of DBS’s treasury and markets department, says the bank has always made innovation a priority to meet the fast-changing needs of the financial sector. Partnering with MaxxTrader and leveraging their expertise enhances DBS’s digital asset trading offering and trading hours even over weekends without committing to additional backend resources. “Our ability to streamline the end-to-end process efficiently enables us to explore the market’s full potential by providing even more dynamic pricing, financing, and risk solutions around the clock. We believe this will contribute to Singapore’s growing influence as a global digital asset hub,” Tai adds.
Meanwhile, senior managing director and head of fixed income, currencies and commodities (FICC) at SGX Group Lee Beng Hong, says that as an industry leader in multi-asset market infrastructure development, the group is making strides in applying new technologies in enhancing workflows, particularly in FX and fixed-income markets. “MaxxTrader’s stable infrastructure fills an important gap in the market by introducing institutional-grade solutions, delivering cutting-edge technology that works for crypto and other tokenised traditional assets. This is an exciting development for SGX FX as we continue to bring unrivalled trading solutions for global market participants.”— Felicia Tan
