Economy

Economy: Potential easing by MAS coming on Wed?
This week, MAS will be releasing its semi-annual moetary policy decision on Wed, where majority of the street projects a policy easing in response to a probable technical recession, and amid the absence of inflationary pressures.

The key focus for the decision hinges on core inflation, which has undershot the central bank's range of between 0.5% and 1.5% forecast year-to-date, thanks to the lower oil prices and budgetary measures, such as:

1) Reduction in the concessionary foreign domestic worker levy,
2) One-year road tax rebates,
3) Increase in medical subsidies.

However, unlike other countries that engaged in easing to boost liquidity in their domestic economy, Singapore's exchange rate policy may provide limited room to for the nation to manoeuvre this time round, especially with US looking to raise benchmark rates for the first time since 2006.

Hence, if the central bank moves in tandem with majority of the street, a weakening of the Singapore dollar will occur and will apply upward pressure on short-term interest rates.

In that case, potential beneficiaries include the three local banks, DBS, UOB and OCBC, which will gain from net interest margin expansion.

Additionally, the weaker SGD would benefit stocks which derives a large proportion of its revenue in USD. This includes Ezion, Pacific Radiance, SIA, SingTel, ST Engineering and Venture.