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Singapore ETF: Central Bank Unscheduled Cut Hints at Concerns


In a surprise move, Singapore’s central bank eased its monetary policy, depreciating the country’s currency to its weakest since 2010 against the greenback and sending the country-specific exchange traded fund tumbling on increased uncertainty.

The iShares MSCI Singapore ETF (EWS) fell 1.2% Wednesday while the iShares MSCI Singapore Small-Cap ETF (EWSS) decreased 1.4%. Year-to-date, EWS dipped 1.2% and EWSS rose 2.6%.

Meanwhile, the Guggenheim CurrencyShares Singapore Dollar Trust (FXSG) dropped 1.0% Wednesday. The Singapore dollar dipped to S$1.3512 per USD Wednesday, the weakest since September 2010 and has declined 6% against the greenback over the past three motnhs, the third largest loser among 11 most-traded Asian currencies. FXSG is down 1.1% year-to-date.

The Monetary Authority of Singapore made an unscheduled statement Wednesday, revealing it will seek a slower pace of appreciation against a basket of foreign currencies, reports Sharon Chen for Bloomberg.

It was the first emergency policy change since September 11, 2011, reflecting the potential uncertainty in the country’s growth outlook. The central bank only has two scheduled policy announcements per year.

“They’re essentially trying to stay ahead” by moving before the scheduled April policy review, Song Seng Wun, an economist at CIMB Research, said in the article. “We’ve already seen so many central banks cut. For Singapore to do such an unscheduled move, it has to be against the backdrop of enormous uncertainty.”

Singapore is the latest of nine countries to ease monetary policies this month. For instance, the European Central Bank announced an aggressive bond purchasing program while Canada, Denmark and India have cut interest rates. More central banks may follow suit, with the Bank of Japan chief stating that the country could require additional stimulus and Thai policy makers facing pressure to lower borrowing costs. [A Slump for Singapore ETFs]

Specifically, the country may be trying to head off a deflationary spiral that could stagnate the economy – the Singapore central bank cut its inflation forecast to 0.5% for 2015.

“Singapore is experiencing a profound disinflation dynamic that in the absence of recovering domestic or external demand could morph into more problematic deflation,” Glenn Maguire, an economist at Australia & New Zealand Banking Group Ltd., said in the article. “We continue to assess Singapore as a growth underperformer in 2015.”

iShares MSCI Singapore ETF


For more information on Singapore, visit our Singapore category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.