Singapore Mulls Counter-Measures For Influx of New American Dollars

on Sep 18, 2012
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The injection of 40 billion newly-minted dollars into the American economy – which the US Federal Reserve is right now doing via ‘QE3’, its third round of quantitative easing – is bound to have flow-on effects beyond the country’s borders, as moribund offshore ventures and investments are restarted and new projects spring forth.

So prudent countries are considering measures to avoid being caught unawares by a sudden influx of greenbacks and their potential to disrupt carefully managed economies. A good example is surely Singapore, a safe haven of longstanding and likely recipient of a goodly portion of QE3’s anticipated domestic US slopover.
Asiaone.com’s Business section quoted Singapore-based Mizuho Corporate Bank economist Vishnu Varathan as observing, “If the Fed is going to pump in this amount of money, and if the eurozone is not brewing out in a bad way, a lot of these funds will find their way to Asia as they last did.” Varathan noted that these new dollars “… can’t go into public sector HDB, but they could go into the mid-range to luxury segments, and that mops up the supply that was supposed to dampen prices.”

Hong Kong has already moved to blunt any possible QE3-origin spike in an already overheated residential property market, with the territory’s Monetary Authority announcing a new limit for housing mortgages of 30 years. And permitted mortgage servicing capability has been reduced from 50 to 40 percent of a borrower’s disposable income.
But in the less-tightly administered Singapore, to this point there seems to be a more ‘wait and see’ stance from fiscal regulators, an attitude which finds approval amongst market observers. JLL’s Chua Yang Liang, head of South East Asia research, commented: “The current policies we have are sufficient to keep out speculative money from the residential market . . . We have entered a soft policy era.”

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