Singapore eases monetary policy, avoids recession

Singapore has traditionally been the first among Asia’s export-driven economies to be affected during a downturn. (AFP)
Updated 14 October 2019

Singapore eases monetary policy, avoids recession

  • Monetary policy eased for the first time in more than three years
  • Singapore’s central bank joins others around the world in loosening policy as fears mount of a global economic slowdown

SINGAPORE: Singapore eased monetary policy for the first time in more than three years on Monday as the US-China trade war bites, while the export-reliant economy narrowly avoided recession in the third quarter.
The financial hub’s central bank joins others around the world, from Europe to the US, in loosening policy as fears mount of a global economic slowdown.
The city-state has traditionally been the first among Asia’s export-driven economies to be affected during a downturn, making it a closely watched barometer of demand for goods and services for the rest of the region.
And it has been hard hit in recent months, with growth rates and exports plummeting, as US-China tensions upend the global trading system.
The Monetary Authority of Singapore (MAS) said it will “reduce slightly” the slope of the band at which its currency is allowed to move, effectively allowing for a weaker dollar, as had been expected.
Instead of using interest rates, Singapore manages monetary policy by letting the local dollar rise or fall against a currency basket of its main trading partners.
“In the last six months, the drag on GDP (gross domestic product) growth exerted by the manufacturing sector has intensified, reflecting the ongoing downturn in the global electronics cycle as well as the pullback in investment spending, caused in part by the uncertainty in US-China relations,” MAS said.
Preliminary GDP data released at the same time showed Singapore’s economy narrowly avoided tipping into a technical recession, defined as two consecutive quarters of contraction.
It expanded 0.6 percent in the three months to September on a quarterly basis, bouncing back from a shock 2.7 percent second-quarter contraction. The economy grew 0.1 percent on a yearly basis.
The manufacturing sector, a pillar of the trade-dependent economy, shrank 3.5 percent, following a 3.3 percent contraction the previous quarter.
Capital Economics forecast the economy will likely grow by just 0.5 percent this year. The city-state last slipped into recession in the aftermath of the global financial crisis in 2008.
Song Seng Wun, a regional economist with CIMB Private Banking, said with the economy having narrowly avoided recession, MAS must have felt that a slight tweaking of policy was enough.
The central bank will be hoping that “maybe growth in 2020 might be better than 2019,” Song said.
“Perhaps the US-China phase-one deal adds to a little bit of hope for 2020,” he said.
President Donald Trump announced Friday that US and Chinese negotiators had reached a partial trade deal, bolstering hopes that the world’s two biggest economies may be on the path to resolving their long-running row.


Saudi Aramco sets IPO share price between 30-32 riyals

Updated 22 min 51 sec ago

Saudi Aramco sets IPO share price between 30-32 riyals

  • Saudi Aramco intends to buy $1 billion worth of shares for employee

DUBAI: Saudi Aramco’s multibillion-dollar initial public offering (IPO), probably the biggest in history, shifted to full gear as its share price was announced and subscription to the world’s biggest oil company commenced on Sunday.

Saudi Aramco set an indicative share price between 30 and 32 riyals for the 1.5 percent of its oustanding shares – or about 3 billion shares of its 20 billion regular shares – that it would offer for the domestic part of its public offering. The blockbuster IPO could be worth least $24 billion, and values the state-owned oil giant at up to $1.71 trillion.

The offering – or book-building – period for institutional subscribers, which started today, closes on December 4 while the retail offering for individual investors will begin on November 21 and will end on November 28. Individual investors will subscribe based on a price of 32 riyals, the top end of the price range, the company noted in a document.

The final pricing for the Aramco shares would be announced on December 5, and Saudi Tadawul  – the Kingdom’s stock exchange – would make an announcement when initial trading day would be, the company added.

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For more of our coverage of the Aramco IPO, click here.

To view key Aramco IPO documents, click here.

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Samba Capital & Investment Management Company has been designated as issue manager while National Commercial Bank, Saudi British Bank, Samba Financial Group, Saudi Investment Bank, Alawwal Bank, Arab National Bank, Albilad Bank, Aljazira Bank, Riyad Bank, Al Rajhi Bank, Alinma Bank, Banque Saudi Fransi and Gulf International Bank were named as receiving banks.

If there are applications for more than the 0.5 percent on offer — amounting to 1 billion shares — allocations to private investors will be scaled back proportionate to demand; if there are fewer applications than the 0.5 percent when all maximum applications are satisfied, private investors can have the over-payment refunded either in cash via the receiving banks or in the form of extra shares in Aramco.

There is an incentive mechanism in the IPO whereby Saudi investors will receive a bonus one-for-ten allocation of shares, up to a maximum of 100 shares, if they do not sell shares in the market for a period of six months after dealings begin in December, at a date still to be determined.

Saudi Aramco also intends to buy $1 billion worth of shares for employees under a plan to incentivize executives and staff members alongside the IPO next month.

The plan — which was disclosed in the IPO prospectus — will involve Aramco buying the shares from the government and making them available for employees under special terms.