ANCHOR OF ECONOMIC
AND FINANCIAL STABILITY
- MANAGEMENT OF OFFICIAL FOREIGN RESERVES
- Investment Performance
MANAGEMENT OF OFFICIAL FOREIGN RESERVES
As at 31 March 2016, MAS held S$332 billion (US$246 billion) of official foreign reserves (OFR) on its balance sheet.
MAS invests the OFR conservatively in a well-diversified portfolio of cash, bonds and equities that seeks to achieve good long-term returns. The portfolio is diversified across advanced and emerging market economies, with investment-grade bonds in the advanced economies comprising the largest allocation in the portfolio. About three-quarters of the OFR are denominated in the G4 currencies i.e. USD, EUR, JPY and GBP. Within the G4 currencies, the USD forms the bulk. Diversification across markets, assets and currencies helps to enhance the resilience of MAS' portfolio across various market conditions.
In MAS' financial statements, the OFR are accounted for on a lower of cost and market valuation basis. A valuation provision is made against investment gain when the market value of an OFR asset falls below cost. An unrealised gain is not recognised when the market value of an OFR asset rises above cost.
MAS' financial results are reported in SGD. The reported value of the OFR hence depends on the exchange rate movements of the SGD vis-à-vis the foreign currencies in which the reserves are held. Such currency movements will result in translation effects in MAS' financial statements. These translation effects have no impact on the international purchasing power of the OFR, and hence do not affect MAS' ability to conduct exchange rate policy or provide a buffer in the event of a sharp deterioration in Singapore's balance of payments. Accordingly, it would not be meaningful to hedge against the SGD to mitigate currency translation effects.