Date: For Parliament Sitting on 4 July 2023

Name and Constituency of Member of Parliament

Mr Leong Mun Wai, NCMP

Question:

To ask the Prime Minister for each year since 2020 (a) what is the total inflow of foreign funds into Singapore, broken down by each source country; and (b) whether the Government will provide an assessment on the impact of the inflow of such foreign funds on (i) Singapore’s Official Foreign Reserves position (ii) the private property market and (iii) inflation.

Answer by Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS:

1. Mr Speaker, this PQ is related to the Member’s earlier question on foreign fund inflows through family offices which I had addressed in Parliament on 10 May 2023See “Oral Reply to Parliamentary Question on wealth inflows and family offices” .. The Member has now broadened the scope to all foreign fund inflows.I will focus my answer on this broadened scope. But Mr Leong should consider my response in totality with the explanation I had provided previously.

2. I had shared some data from MAS’ annual Asset Management Survey pertaining to the category on “non-retail individual clients”, which is closest to family offices. Broadening the coverage to all foreign investor types, that is, both non-retail individual and institutional clients, the survey shows that the total stock of Assets Under Management (AUM) of foreign clients managed by financial institutions in Singapore increased by about S$600 billion on average in 2020 and 2021 each.

3. Mr Leong asked for a breakdown by source countries for total foreign fund inflows. Investors come from a wide range of countries. The top-sourced foreign region for the increase in Singapore’s AUM in 2020 and 2021 were the Americas, followed by Asia-Pacific, then Europe.

4. Mr Leong also asked about the impact of the inflow of foreign funds on Singapore’s Official Foreign Reserves, inflation, and the private property market. As explained previously, most of the funds managed by Singapore’s asset management industry are both sourced from and invested in assets outside of Singapore. Singapore acts as an intermediary for these fund flows, which typically remain in foreign currencies and therefore have little or no effect on the Singapore dollar exchange rate or Official Foreign Reserves (OFR).

5. The capital flows that are more relevant for the demand for Singapore dollars and OFR are the foreign currency inflows associated with inward foreign direct investments as well as Singapore’s exports. As I had explained previously, MAS intervenes in the foreign exchange market by purchasing US dollars for Singapore dollars to ensure that the trade-weighted exchange rate stays within MAS’ chosen monetary policy parameters. MAS thus accumulates OFR in the process.See “Second Reading Speech for Monetary Authority of Singapore (Amendment) Bill” . The incipient expansion in base money caused by OFR accumulation is in turn sterilised through MAS’ money market operations. This ensures there is no excessive growth in money supply.

6. I had also previously explained that inflation in Singapore is being driven by tight labour market conditions and has little to do with foreign fund or capital inflows. Likewise, purchases by foreigners have been a low share of all private residential property transaction volume over the last three years.

[1] See “Oral Reply to Parliamentary Question on wealth inflows and family offices” .

[2] See “Second Reading Speech for Monetary Authority of Singapore (Amendment) Bill” .