MAS records $15.84b profit, helped by FX valuation gains

SINGAPORE (Reuters) - Singapore's central bank posted a $15.84 billion net profit in its last financial year, helped by a drop in the local currency that led to valuation gains on its foreign currency holdings.

The Monetary Authority of Singapore (MAS), in its annual report issued on Thursday, also reiterated that the economy is projected to grow 2-4 per cent this year and kept its core inflation forecast unchanged at 2-3 per cent for 2014.

But MAS Managing Director Ravi Menon told a news conference that it had lowered its forecast range for headline consumer inflation to 1.5-2.0 per cent from the previous 1.5-2.5 percent.

The central bank's net profit for the last financial year ended in March marked a turn around from a $10.61 billion net loss incurred the previous year, when the Singapore dollar's rise diminished the value of its foreign currency holdings.

The net profit in 2013/14 came as the MAS made investment gains and foreign exchange valuation gains on its official foreign reserves (OFR), which totalled $343 billion at the end of March and make up more than 90 per cent of the assets on the central bank's balance sheet.

The MAS said its official foreign reserves (OFR) made total gains of $16.5 billion in 2013/14, reflecting investment gains of $10.6 billion and foreign exchange valuation gains of $5.9 billion.

In 2012/13, the OFR made investment gains of $9.4 billion, but had incurred foreign exchange valuation losses of $19.5 billion.

"With regard to currency composition, about three-quarters of the OFR are denominated in the major G4 currencies i.e. US Dollar, Euro, British Pound and Japanese Yen, with no single currency allocation making up more than one-third of the composition," the central bank said.

In 2013/14, the euro rose 9.1 per cent against the Singapore dollar, while the US dollar rose 1.4 per cent and sterling gained 11.3 per cent versus the local currency, leading to foreign exchange gains, the MAS said.

The gains were partially eroded by falls in foreign currencies such as the yen, which fell 7.3 per cent against the Singapore dollar, it added.

The MAS said Singapore's asset management industry continued to grow, with assets under management having risen to $1.82 trillion in 2013, up from $1.63 trillion in 2012.

With regard to the economic outlook for the rest of the year, the MAS said a gradual improvement in global conditions was likely to lend some support to Singapore's export-oriented industries.

Domestic-oriented sectors were likely to remain resilient, helped by public infrastructure expansions in the construction, education and healthcare industries, it added. "Nonetheless, while cyclical factors are broadly supportive of growth this year, the effects of the ongoing restructuring could dampen growth," the MAS said.

The central bank said the labour market was likely to remain tight as the economy transitions toward more productivity-driven growth, noting that the overall unemployment rate had fallen to a 16-year low of 1.9 per cent in 2013.

"Wage pressures will persist and firms are likely to continue passing on higher business cost to consumer prices," it said.

Headline consumer inflation fell more than expected in June to a three-month low of 1.8 per cent year-on-year.

The central bank's core inflation measure excludes changes in the prices of cars and accommodation, which are influenced more by government policies.