MAS' $9.2 billion net loss won't crimp expenditure plans

DESPITE its conservative stance, the Monetary Authority of Singapore's (MAS) investment portfolio suffered a net loss of $9.2 billion for the fiscal year ended March, it revealed yesterday.

Like the other two managers of Government assets - Temasek Holdings and the Government of Singapore Investment Corp (GIC) - the central bank was rattled by the turbulence in the financial markets.

So heavy were its losses that they wiped out about 80 per cent of MAS' combined gains of $11.29 billion in the preceding two profitable years, said the Authority, which invests all of the official foreign reserves. "For this financial year, there will be no contribution to the Consolidated Fund, nor return of profits to the Government."

Last year, after enjoying a net profit of $7.44 billion, the statutory board ploughed 18 per cent or $1.34 billion into the Consolidated Fund, which comprises all revenues of Singapore not allocated to specific purposes by any written law; it also returned profits of $2.53 billion to the Government.

Will the MAS' non-contribution this year crimp national expenditures? When asked, a spokesperson of the Ministry of Finance said: "In estimating our revenues and planning our expenditures for FY '09, we have already taken this into account. Hence, our expenditure plans will not be affected."

Thankfully, the months since April have been rosier. "With the broad-based upturn in financial markets after the close of the financial year, the valuation of MAS' foreign assets has improved and more than half of the losses have been recovered," managing director Heng Swee Keat told the media.

"The extent of loss has been mitigated as we raised the liquidity profile of our portfolio in the early part of 2008, in the face of greater uncertainties," he added. This could have included converting investments into cash.

Arguably, the losses could have been greater if not for the MAS' investment approach: It is conservative, compared to Temasek's higher-risk-higher-return style and GIC's slightly conservative stance, Finance Minister Tharman Shanmugaratnam had said in May.

MAS, said Mr Heng, invests largely in "highly liquid assets with a large proportion in bonds, with small exposures in equities - and almost all of these are invested in developed markets in the US, Europe and Japan".