With recent concerns surfacing in regard to world economic growth and the world economy in general, some investors have been moving funds toward the Singaporean bond markets.
Even while the Singaporean Dollar has seen a loss in comparison to the US Dollar, investors are still seeing the local fixed income securities as a smart investment. The Singapore Fixed Income Index has shown a gain of 3.13 percent on the year in comparison with the Straits Times Index, which has shown an increase of 2.71 percent on the year.
Jason Khoo of HSBC bank attributes much of the gains seen in the fixed income indices to government bonds, saying, “The SGD bond market and, by extension, the Singapore dollar, continues to be attractive to investors given its relative stability, and on a year-on-year basis, the SFI, SFI Corporate and SFI Government Bond Indices have all moved upwards, driven by strong liquidity that has been channeled towards the SGD bond market.”
DBS Bank head Clifford Lee also believes that the continued strength of the US dollar is unlikely to keep investors out of the market in Singapore. In explanation of this belief, Lee said, “As mentioned a while back, most investors in the SGD bonds are not investing on the back of a foreign currency play i.e. they are not investing in SGD bonds in a short term anticipation of an appreciation of the SGD. Most of these SGD investors have natural SGD to deploy, so as such they are less sensitive to the recent USD/SGD movements.”
Mr. Lee actually goes a step further by claiming that this could add a further boost to the SGD bonds market, claiming that some investors may try to profit from both the yield on the bond and the increase of the currency value.