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Singapore Market Report


Singapore is one of the world’s wealthiest nations and was once ranked as the easiest country to conduct business by the World Bank. Its economy is a highly developed market and was ranked as most open in the world. It is an export- oriented market and exports 66% of its domestic produce. Principal exports of the country are refined petroleum products, chemical products, and electric and telecommunication equipment.

Singapore’s economy is dominated by services and manufacturing industry is the largest, contributing around 20% - 25% to the country’s GDP. Followed by manufacturing industry is the financial services industry which has enjoyed resilient growth because of its favourable environment of doing business. It is a regional hub for Global investors and facilitates services, technologies, and skills to international, regional, and home markets.

Other key industries of Singapore’s economy are medical technology, aerospace, engineering, tourism, healthcare, and content development.


Origin of Singapore’s financial system dates to its colonial days when Sir Stamford Raffles of The British East India Company established a trading port in 1819. Because of its geographical advantage, Singapore became a leading trade entrepôt under the British Empire.

In August 1963 after almost 100 years, Singapore was finally free of the British rule and joined hands with Malaysia. But it was only after its independence from the Federation of Malaysia in 1965, that Singapore started to take a more efficient approach towards establishing its financial markets.

Formation of Asian Dollar Market along with Asian Currency Unit in 1968, served as a groundwork for the establishment of global financial market in Singapore, as they attracted foreign banks and institutions in Singapore’s domestic market.

For country’s economic growth, the government decided to shift its activities from producing for substituting imports to producing for exports.

This shift required substantial amount of money so, in the late 1960s, main function of the financial sector was merely to fund manufacturing activities of the domestic manufacturers. Loans advanced to the manufacturing sector increased to 27.6% in 1973 of the total, from 12.8% in 1962.

During the 1970s, the government recognized financial sector as an essential source of growth and provided incentives for its development. The focus was on developing more sophisticated and specialized activities in the financial system.

By 1980s, Singapore had become a powerful country, with some of the world’s biggest organizations and multinational corporations operating in the country.

Manufacturing and Commerce sectors arrived at their peaks and alongside it, financial sector developed to turn into a significant segment of the nation's GDP. By then it was apparent that the financial sector was not, at this point simply a supporting arm however a critical industry of the country, contributing fundamentally to the economy and having an existence.

Stakeholders in the Financial System

Regulatory Authority: Monetary Authority of Singapore is the central bank and financial regulator of Singapore and was established in 1970 after a bill was passed on 2nd September 1970. It is a sole regulator in Singapore and regulates all the financial intermediaries in the country. It started operating on 1st January 1971 as the central bank and the financial regulator.

Like any other country’s Central Bank, Singapore’s central bank also issues currency, manages foreign reserves, controls interest rate in the economy, controls monetary policy, regulates banks, act as their banker and as an agent to the government.

Banking Sector: There are 4 local banks and 117 foreign banks in Singapore.

Local Banks of Singapore are Bank of Singapore, DBS Bank Ltd, United Overseas Bank Ltd and Oversea Chinese Banking Corporation Ltd.

And foreign banks are further divided into the following categories:

i. Full Banks – These banks provide all sorts of banking services to its clients. Presently there are 20 full banks in the country, few of them are: Bank of India, Citibank and Standard Chartered. Out of these 20 banks, 9 have Qualifying full bank privileges.

ii. Offshore Banks – These banks are branches of Asian overseas banks, operating in Singapore, they can execute transactions in overseas currency units. Transactions in Singapore Dollars (SGD or S$, currency of Singapore) can only be done in Domestic Banking unit, but with certain restrictions. Example of offshore banks are OCBC Bank, Bank of America and Korea Development Bank.

All the offshore banks have been converted into Wholesale banks after 2016.

iii. Wholesale Banks – These banks are also subsidiaries of overseas banks, who provide all sorts of banking services except carrying out transactions in SGD. Examples: ING Bank, Deutsche Bank, Bank of Montreal and Bank of Baroda.

There are total 99 Wholesale banks currently, including the converted Offshore banks.

iv. Merchant Banks – These banks perform a variety of functions like conducting underwriting, providing services such as management of public issues, loan syndication, non-resident investments and mergers and acquisitions. They prepare their books in both Asian currency unit as well as Domestic Banking Unit, but in the case of Domestic Banking Unit they can only trade with banks or corporate bodies whose funds are raised by equity. There are 22 Merchant banks in Singapore. Examples: ANZ Singapore Ltd., Axis Bank Ltd, DVB Group Merchant Bank Ltd and Bank of America Singapore Ltd.

v. Financial Companies – These institutions are authorized to offer loans to the public for purchasing assets such as cars or real estate. They can accept deposits with certain restrictions and are not allowed to provide unsecured loans valued over 5000 SGD, conduct transactions in foreign currency or hold valuable metals or shares in foreign currency. Singapore has only three financial companies: Singapura Finance Ltd, Hong Leong Finance Limited, and Sing Investments and Finance Limited.

Stock Exchange: The Singapore Exchange (SGX) is the only exchange in Singapore and performs regulatory activities for listings and acts as issuer regulator, member supervision and market surveillance. It is the aftereffect of the consolidation between the Stock Exchange of Singapore and the Singapore International Monetary Exchange. It is regulated by the central bank of Singapore, MAS.

The SGX has 754 listed companies and a market capitalization of around 700$ billion. The main stock index is the FTSE Straits Times (STI). It tracks the exhibition of the best 30 SGX listed companies and is broadly viewed as the benchmark index for the securities exchange in Singapore. Its market capitalization is worth $583.67 Billion.

SGX’s divisions, Securities Trading Division (SGX-ST) trades equity and Derivatives Trading Division (SGX-DT) trades derivatives, futures and options.

Money Market: Singapore’s money market consists of many banks and financial institutions. They are involved in trade of various short term and liquid instruments like Treasury bills, Certificate of deposits and Commercial papers. This market is also regulated by the Monetary Authority of Singapore.

Insurance Sector: There are various types of insurance companies in Singapore: Direct Insurer, Reinsurer, Captive Insurer which are further categorized, based on the type of insurance, the company provides, which are life, composite and general.

Foreign Exchange: Singapore’s foreign exchange is the third biggest worldwide after London and New York and is the biggest in Asia Pacific. Daily, over half a trillion US dollars of Foreign Exchange is traded in Singapore. Singapore’s Foreign exchange is important for its status as a major trading centre in the region and supports the liveliness of Singapore's international financial centre.

With the entirety of the main five banks in the world lodging their provincial Foreign Exchange deals and exchanging groups in Singapore, it offers a profound and liquid market for the trade of G10 currencies and developing Asian currencies.

Economic Analysis

There have been several crises that negatively affected Singapore’s economy however this paper will only talk about three namely The Asian Financial Crisis 1997, The Global Financial Crisis 2008 and the covid pandemic, because of which the country has slipped into recession.

● The Asian Financial Crisis, 1997

Though the main reason behind this financial crisis was the collapse of Thai exchange rate, Singapore’s economy had also suffered severe impacts. As it has strong trade and financial relations with other Asian countries and is extremely vulnerable to their activities.

GDP growth rate of the economy fell from 11.8% in the third quarter of 1997 to -2.1% in the second quarter of 1998 and further to -1.1% in the third quarter. The unemployment rate also increased from 2.4% in 1997 to 3.2% in 1998.

Singapore’s exports to the crisis hit countries decreased countries. NPA (Non- Performing Assets) of the local banks working in these countries had also increased.

Stock Market was also hit hard by the crisis and suffered huge drop. In January 1997 (before the crisis), SGX opened with 2,055.44 points with the ST index, which fell by almost 60% in a span of 14 months and was 856.43 points (10 year low) in September 1998.

Singapore’s currency also experienced a decline of 18.3% over a period of six months. It decreased from S$ 1.43 per US$ on 2nd July 1997, the day before Thai Baht collapsed (and turned into float rate) to S$ 1.75 per US$ on 7th January 1998.

Its managed exchange rate had let the Singapore Dollar to depreciate against US$ in a response to its decreasing exports. This crisis had taught Singapore various lessons, it proved that the country has strong fundamentals which helped to fight the crisis. The impact on Singapore could have been more but the country’s policies saved it from the worst experiences.

because domestic demand in those countries fell and Singapore’s goods became less competitive. Singapore’s banks were also affected because they had lent large amount of money to these

● The Global Financial Crisis, 2008

Singapore had experienced one of its most severe recession since independence because of the Global Financial Crisis of 2008. World’s leading stock exchanges have suffered because of this and so did Singapore’s.

Singapore was the first East Asian country to experience recession in 2008 since it is an export-oriented economy.

GDP data of 2008 and 2009 reveals that the impact of the crisis was not felt until mid-2008. GDP growth rate in the third quarter of 2008 was as high as 6.7%, which suddenly dropped to 2.1% in the fourth quarter and further declined to -0.2%, -3.7%, -6.5% in the first, second and third quarter of 2009, respectively.

Almost 66% of Singapore’s domestic production is exported and since it is a global crisis, it had severely impacted the country’s exports. In October 2008, exports fell by 15% as demand from major countries like USA, Western Europe and Japan decreased. The drop in exports was led by electronic goods as they accounted for one third of the total domestic production. Country’s exports further declined by 26% in the first quarter of 2009.

Because of decreasing exports, Singapore’s currency lost more than one tenth of its value against dollar, which made it one of the worst performing currency during the crisis. It declined by 8.1% in that period. Foreign Investments in the country also decreased to S$ 0.7 billion from S$ 7.8 billion till the third quarter of 2008.

Singapore’s stock market recorded 2,947 points at the end of June 2008 which decreased to 1,699 points at March end 2009. Also, lending in Asian Currency Units contracted by 16% and the ratio of NPAs increased to 2.5% in the second quarter of 2009 from 1.5% in the fourth quarter of 2008.

Singapore’s economy weathered the financial crisis better than most of the countries with its government’s support. The government had implemented many policies and announced packages to retrieve the country’s economy.

● Pandemic Crisis: COVID-19

The Covid-19 pandemic has caused serious disturbances to global economic activities and its impact on Singapore’s economy has also been severe. Its image as a major manufacturing and prospering technology hub has come to a halt.

It was one of the first countries to discover Covid-19 cases, which started taking preventive measures such as lockdowns, limited movements and entry bans from the end of January and as a result the businesses were forced to shut.

Singapore’s economy shrank by 13.2% year on year in the second quarter of 2020 and the GDP growth rate for the year has been projected to be -7% to -5%. Since two consecutive quarters have reported contraction, Singapore has technically slipped into recession.

Singapore’s currency fell by 0.2% to S$ 1,393 against US$ on July 15th and the ST Index declined by 1% on the same date.

Due to partial lockdown and very limited movements, sales in the country declined by 52.1% in May from the previous year. Sectors like manufacturing and wholesale trade have been impacted because of supply chain disruptions. Tourism related sectors such as air transport, accommodations have also been affected severely as travel has been restricted to control the spread of Corona Virus.

However, there are bright points also in the economy, the demand for online sales and services rose and the supermarket sales and convenience store sales expanded by 56.1% and 9.1% respectively. Also, country’s financial sector grew by 5.9% till the second quarter.

Though Singapore’s government has taken many measures to combat this situation, the future of Singapore’s economy now depends upon how safely they operate as the Covid-19 situation remains unstable. No one knows when the pandemic will be over so we will have to learn to live in the new normal.


Singapore has developed itself to be a central home of finance, business, and trade in the whole of South east Asia despite being affected by so many crises and having no natural resources of its own.

The credits for its development can be given to the first Prime Minister of Singapore (after its independence from Malaysia in 1965), Mr. Lee Kuan Yee. He took right decisions for the country and used what the country had at that time in their favour rather than bawling over things it did not have.

Overall, the economy is in a quite stable position excluding the Covid-19 effects. However, it may still face growing challenges as no country is ideal.

Singapore’s population is aging because of which economic growth rate has been hindered and the aging population has also impacted the productivity and availability of workforce in the country. Despite government’s efforts, population growth in the country has not increased. So, to overcome this challenge, the government should have liberal immigration policies and adopt more policies to attract young talents from other countries.

Singapore is very vulnerable to activities of other countries as it is an export-oriented country. Any disruptions in those countries impact Singapore’s economy severely, like in the case of Asian Financial Crisis of 1997. High dependency on others is not commendable for an economy, so the country should take measures to become self-sufficient and generate domestic demands.

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