Introduction

1   Distinguished guests, ladies and gentlemen. Good morning. I am very happy to join the FX community today at this Euromoney Asia Forex Forum. I understand that this is the second time that Euromoney has chosen to host this industry-acclaimed conference series in Singapore and I’m also happy to note that it has expanded its coverage to Pan-Asia. This is very apt in view of the growing importance of China as an economic engine and the increased influence of the Chinese Yuan in global FX markets as China experiments with the use of its currency for trade financing. 

Economic Developments

2   To begin, it may be useful to take stock of global economic developments in the post crisis environment. When we met at the last conference, the effects of the global financial crisis were still unravelling. One year onwards, the global economy appears to be expanding again, aided by massive policy support by governments around the world coupled with the recovery of economies that are less leveraged – such as Asian economies and other emerging countries. According to IMF’s World Economic outlook published in October 2009, it is projected that advanced countries would increase output by 1.7 percent in 2010, while emerging and developing countries are expected to grow by 5.5 percent in the coming year. Global growth is forecasted to grow by 3.2 percent in 2010; an upward revision relative to IMF’s forecast in April 2009. In January 2010, IMF further revised its projection of world growth to 3.9 percent.

3   Overall, we see improvements in trade and finance, as well as signs of stabilising consumption and investments. In the financial markets, equity markets have rallied and credit spreads have narrowed. Both the Dow Jones Industrial Average and the S&P 500 have rebounded. Several Asian equity indices have also improved after hitting 12-year lows in early 2009. Increasingly, asset markets are showing signs of recuperation from the global financial crisis. As mentioned earlier, Asian economies are at the forefront of this economic recovery. Dr Tony Tan, deputy chairman and executive director of the Government of Singapore Investment Corporation (GIC) gave a speech on 18 Jan 2010 and said, “My belief is that the next decade could be the “Golden Era” for Asia”. With this as a backdrop, how then should financial institutions as well as investors position themselves to emerge as the winners of tomorrow?

Opportunities in Asia

4   At the centre of the fastest growing region in the world, Singapore has continued to attract foreign investments into our country by offering a marketplace based on strong corporate governance, a talented workforce as well as a robust legal and regulatory framework. In addition, Monetary Authority of Singapore (MAS) continues to ensure an environment that is conducive to the growth of financial activities. Efforts have been made to attract and grow the buy-side community, including our asset management, hedge funds, private banking and corporate treasury industries.
 
5   Our asset management industry in particular, held up better than the general market performance throughout the crisis. In 2008, total asset under management (AUM) reached a level of S$ 864 billion. This represents a rolling 5-year AUM growth rate of 16 percent per annum. Fund flows have also resumed in 2009. In the first half of 2009, the AUM of the 20 largest asset managers in Singapore grew by 23%, reflecting the attractiveness of our markets to buy-side participants.

6   Corporate treasury activities have also grown. Singapore is widely regarded by well-reputed companies from the US, Europe and Asia Pacific as a key location for corporate treasury activities and as an Asian headquarters to access major markets such as China, India and Japan. Through their treasury operations here, these companies conduct a variety of capital market activities including risk and liquidity management, fund raising and financing activities. More Asian enterprises are also looking to set up their treasury operations in Singapore to facilitate their internationalisation plans.

7.   Many international banks continue to hub their global and regional foreign exchange trading desks in Singapore to tap on this market, as well as to service the greater Asia Pacific region through Singapore. The Singapore Foreign Exchange Market Committee (SFEMC) October 2009 FX survey also showed that trading activity for traditional FX in Singapore has remained healthy post-crisis, and has kept pace with growth rates in other major FX trading centres such as London.

Developments in Treasury Markets

8   Nevertheless, there were instances when buy-side participants found it difficult to get quotes from the interbank markets due to extremely low liquidity. Those who relied on traditional methods had no choice but to accept wider bid-ask spread quoted to them. This has raised awareness of the benefits offered by electronic trading platform, which include lower cost of trading, greater liquidity and potentially greater transparency in pricing.

9   While the notion of electronic platforms is not new in Asia, the take-up rate only started increasing significantly over the last few years. We note that several banks have already devoted a lot of resources to build up their e-portal business, enhancing their technologies by adding hedging engines, algorithm trading as well as API  services to customer sites. Multi-dealer portal services providers such as FXall and Currenex have also been expanding their market share in Asia, whilst financial data providers such as Reuters and Bloomberg have also joined the competition. However, while the industry continues to seek technological and system enhancements to better serve its clients, risk management and control measures have to keep pace in order to address potential system control issues.
 
10   Indeed, the global financial crisis has sparked a renewed focus on risk management for both regulators and investors alike. Globally, regulators are examining their regulatory frameworks with a focus on addressing issues such as capital adequacy of financial institutions, the need for enhanced risk controls as well as efficient counterparty and liquidity risk management. On this front, MAS is constantly monitoring market and regulatory developments around the world and will fine-tune our regulatory approach as appropriate. As we align ourselves with international standards, we are mindful in maintaining a balanced approach towards any regulatory changes. This will help to ensure that Singapore continues to provide a business friendly environment for financial sector growth, while maintaining a robust legal and regulatory framework.

Building Competencies

11   Further, while time and financial resources are spent on improving the hardware, it is also important that the “software” is not neglected. The FX industry, like many other industries, is a talent-driven industry where building a successful team usually hinges on identifying the right talent and building the right competencies. On this front, let me share some initiatives that are in place to build competencies for Singapore’s financial sector.

12   One such initiative would be the Financial Industry Competency Standards (FICS) that was developed jointly with the industry and the Workforce Development Agency (WDA), with an aim to enhance the standards and professionalism of the financial workforce. In view of challenging market conditions, FICS accredited programmes were given enhanced funding support of up to 90 percent of the programme fees, so as to encourage the continued development of competencies for financial professionals.

13   Some of the programmes that are relevant to the FX industry include trading, treasury sales, compliance and risk management. MAS also supports relevant training programmes under the Financial Training Scheme, which co-funds training costs for training programmes and courses. On this front, we will continue to encourage the development of more training programmes that are relevant to the advancement of the FX industry and our financial markets as a whole.

Conclusion

14   To conclude, the FX industry, while relatively resilient throughout the financial crisis, is not without its vulnerabilities. It is important that market participants stay vigilant and continue to monitor overall developments in the financial markets and its impacts on business operations. The ability to build a strong risk management culture that is based on transparency and fair business dealings, with an ability to adapt to changing market conditions, would help ensure that the industry would continue to thrive in the new landscape.

15   With that, I wish all participants a fruitful discussion. Thank you.