Singapore’s central bank yesterday expressed concern at the growing mountain of household debt and surging property prices in the city-state, saying they posed “significant risks” to the Singaporean financial system.
While the city-state’s banking system remains sound, the build-up in household debt was “worrying,” Monetary Authority of Singapore Managing Director Ravi Menon said.
He said a growing number of households have borrowed excessively in the property market, largely due to low interest rates and stretched loan tenures.
“The combination of low interest rates, growing leverage and surging property prices poses significant risks to financial stability,” Menon said at a news conference.
Global credit ratings agency Moody’s last week downgraded its outlook on Singapore’s main banks from “stable” to negative,” citing rapid loan growth and rising real-estate prices.
Moody’s said these “have increased the probability of deterioration in the banks’ credit profiles under potential adverse conditions in the future.”
Menon said an estimated 5 percent to 10 percent of borrowers in Singapore “have probably overleveraged on their property purchases — that is, they have total debt service payments at more than 60 percent of their income.”
Lower-income households and those with lesser savings could be strained if mortgage rates rise.
“When interest rates rise, long before any bank gets into trouble, some households will,” he said. “Banks must therefore practice responsible lending and consider the ability of borrowers to service their debt in a sustainable manner.”
Housing loans by banks have risen 18 percent each year over the past three years, he said.
Home loans as a percentage of GDP currently stand at 46 percent, up from 35 percent three years ago, he added.
Menon said the central bank was closely watching the situation.
Singapore’s three homegrown lenders undertake regular stress tests coordinated by the central bank, and are “well capitalized with prudent provisions against loss,” Menon said.
Separately, Menon said Singapore will “comfortably meet” its economic growth forecast of 1 percent to 3 percent this year as demand from the eurozone and the US picks up.
“The advanced economies are in a better shape this year. The tail risks have receded and there is less likelihood of a eurozone break-up or fiscal cliff in the US,” he said.
Merida Industry Co (美利達) has seen signs of recovery in the US and European markets this year, as customers are gradually depleting their inventories, the bicycle maker told shareholders yesterday. Given robust growth in new orders at its Taiwanese factory, coupled with its subsidiaries’ improving performance, Merida said it remains confident about the bicycle market’s prospects and expects steady growth in its core business this year. CAUTION ON CHINA However, the company must handle the Chinese market with great caution, as sales of road bikes there have declined significantly, affecting its revenue and profitability, Merida said in a statement, adding that it would
RISING: Strong exports, and life insurance companies’ efforts to manage currency risks indicates the NT dollar would eventually pass the 29 level, an expert said The New Taiwan dollar yesterday rallied to its strongest in three years amid inflows to the nation’s stock market and broad-based weakness in the US dollar. Exporter sales of the US currency and a repatriation of funds from local asset managers also played a role, said two traders, who asked not to be identified as they were not authorized to speak publicly. State-owned banks were seen buying the greenback yesterday, but only at a moderate scale, the traders said. The local currency gained 0.77 percent, outperforming almost all of its Asian peers, to close at NT$29.165 per US dollar in Taipei trading yesterday. The
RECORD LOW: Global firms’ increased inventories, tariff disputes not yet impacting Taiwan and new graduates not yet entering the market contributed to the decrease Taiwan’s unemployment rate last month dropped to 3.3 percent, the lowest for the month in 25 years, as strong exports and resilient domestic demand boosted hiring across various sectors, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. After seasonal adjustments, the jobless rate eased to 3.34 percent, the best performance in 24 years, suggesting a stable labor market, although a mild increase is expected with the graduation season from this month through August, the statistics agency said. “Potential shocks from tariff disputes between the US and China have yet to affect Taiwan’s job market,” Census Department Deputy Director Tan Wen-ling
UNCERTAINTIES: The world’s biggest chip packager and tester is closely monitoring the US’ tariff policy before making any capacity adjustments, a company official said ASE Technology Holding Inc (日月光投控), the world’s biggest chip packager and tester, yesterday said it is cautiously evaluating new advanced packaging capacity expansion in the US in response to customers’ requests amid uncertainties about the US’ tariff policy. Compared with its semiconductor peers, ASE has been relatively prudent about building new capacity in the US. However, the company is adjusting its global manufacturing footprint expansion after US President Donald Trump announced “reciprocal” tariffs in April, and new import duties targeting semiconductors and other items that are vital to national security. ASE subsidiary Siliconware Precision Industries Co (SPIL, 矽品精密) is participating in Nvidia
RSS