Reserve Management

MAS held S$397.5 billion (US$279.1 billion) of Official Foreign Reserves (OFR) as at 31 March 2020.

Size and Composition of OFR

  • The OFR is invested in a well-diversified portfolio of cash, bonds and equities that aim to provide good long-term returns while being resilient across market conditions. 
  • The portfolio is also diversified across advanced and emerging market economies, and across different currencies.
  • Investment-grade bonds in the advanced economies form the largest allocation in the portfolio. About three-quarters of the OFR are denominated in USD, EUR, JPY and GBP, with USD forming the bulk.

Transfer of OFR

  • In May 2019, MAS transferred S$45 billion from the OFR to the Government for longer-term investment purposes. The stock of OFR has grown steadily over the years and this amount was the excess over what was deemed necessary to conduct Singapore’s exchange rate-centred monetary policy.
  • The exchange rate is an effective instrument of monetary policy in Singapore as it is a small and highly open economy. MAS conducts monetary policy through foreign exchange intervention operations to keep the nominal effective exchange rate of the Singapore Dollar (S$NEER) within a policy band consistent with ensuring medium-term price stability.
  • MAS had assessed that OFR equivalent to at least 65% of GDP would provide a sufficiently strong buffer against stresses in the global economy and markets, and underpin confidence in Singapore’s exchange rate-centred monetary policy.

Investment Performance

  • The rolling 10-year investment performance of the OFR is shown in Chart 1.
  • The gains/losses of OFR as represented by the dark red lines, comprised two separate components – investment gains/losses (blue bars) and currency translation effects (yellow bars).
  • In FY2019/20, the total gain of OFR was S$16.3 billion, comprised investment gains and positive currency translation effects.
  • This year, the OFR recorded lower investment gains of S$2.1 billion as global markets declined sharply in the last quarter of FY2019/20.
  • Currency translation effects amounted to S$14.2 billion in FY2019/20 due primarily to a weakening of the SGD against the USD, EUR and JPY.

Chart 1: Gains/Losses of OFR

Risk Management

  • MAS’ Board approved the investment universe and risk management framework.
  • Investments were subject to risk limits and controls, and MAS conducted stress tests regularly to manage financial risks.
  • MAS monitored investment risks closely and reported them regularly to MAS’ Board and Risk Committee. If required, MAS would undertake risk mitigating actions.