Singapore by foreign participation, the government has

Singapore is located in the heart of Asia andprovides global investors access to the Asia Pacific market.

Thewell-structured business infrastructure and global connectivity and tradeenable global investors to access to a strong Asian market with over 4 billionpeople within the radius of 7 hours’ flight time. Today, there are over 200banks that have chosen Singapore as their operational headquarters. In 2013,the total asset size has reached $2 trillion. These assets are critical for thefinancial system and the local and regional growth in facilitating trade,corporate finance and the building of infrastructure. The pro-business and theeffective regulatory environment has made Singapore as the financial center inAsia (Monetary Authority of Singapore, 2017).

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In order to protect the domestic economy fromoffshore tax havens and overcapacity by foreign participation, the governmenthas separated and implemented policies in order to control these activities. Singaporehas established the Asian dollar market in 1968, the counterpart of theEuro/USD market. The purpose of its creation was to separate offshore bankingservices from the domestic financial sector.

The creation of the Singaporedollar makes it more difficult for speculators to sell and short the Singaporedollar against the US dollar in the foreign-exchange (FX) market. By shortingthe Singapore dollar, speculators are betting on a decline in the value of theSingapore dollar (Strait Times, 1985). The MonetaryAuthority of Singapore can raise the interest rate and thereby provideshort-term liquidity in the domestic banking sector. Speculators are thereforeforced to cover and buy back their FX position since the value of Singaporedollar has been strengthened against the US dollar. This monetary and non-internationalizationpolicy illustrates the possibility of success of interest rate hike inSingapore. Singapore is ranked the third largest FX center globally and thelargest FX center in Asia Pacific by turnover (Monetary Authority of Singapore, 2017).

The hike in the Singapore interest rate hasprovided security and liquidity in the bond market. The government surplusesoffer investors attractive fixed income and a range of investmentopportunities. The Singapore Exchange offers bond investors with a low minimumsubscription size (Monetary Authority of Singapore, 2017).

 

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