While the plummet – and apparent Fed-induced recovery – are still dominating the headlines, there is an announcement by the Monetary Authority of Singapore which should actually get far more press: Chinese commercial banks will be able to invest their clients' money in Singapore stocks. The huge surplusses in Chinese state and individual accounts are well documented. The government in Beijing has decided on a quota of US$16 bln which can be invested in Hong Kong, the UK and now Singapore. This can only be a positive, and will likely outweigh any concerns about a US recession for the Singapore market.

Here is how the Business Times reported the news this morning:

Yesterday, the Monetary Authority of Singapore (MAS) said it had agreed on a supervisory cooperation agreement with the China Banking Regulatory Commission (CBRC) to allow Chinese commercial banks to conduct investments for their clients under the Qualified Domestic Institutional Investor (QDII) programme. These investments include those in Singapore stocks and funds authorised or recognised by the MAS.

Granted, there are a lot of unknowns. We don't know when these arragements will start to take effect. We don't know how much money will actually come our way. The Hong Kong and UK capital markets, and soon the US, German and Japanese equities markets, will compete strongly for capital from China. And there is no certainty of knowing which Singapore-listed stocks Chinese commercial banks will actually invest in, even if they decide to put some money here.

But the bottom line is: let's get real about the future. The US recession is not the only story in town. Investors ought to take a balanced view, rather than panic and sell out in the childish frenzy of recent days.


Mark Laudi

Labels: banks, China, market decline, Monetary Authority of Singapore, QDII, Singapore Market