MAS posts S$15.8b net profit, boosted by forex gains

THE Monetary Authority of Singapore (MAS) has posted net profit of S$15.8 billion, aided by foreign exchange gains, for the year ended March 31.

For the previous year, MAS had run up a net loss of S$10.61 billion on translation effects from the stronger local unit.

In its 2013/2014 annual report released yesterday, MAS said that it holds foreign assets as reserves for the conduct of monetary policy and the defence of the Singapore dollar.

"As I had explained on previous occasions, MAS's overall profit position is strongly influenced by currency translation effects - these are the effects of converting value of our reserves in foreign currency to Singapore dollars," said Ravi Menon, MAS managing director, at the annual report press conference.

These translation effects have no bearing on international purchasing power of MAS's reserves.

During the year, the euro, the US dollar and the pound sterling appreciated by 9.1 per cent, 1.4 per cent and 11.3 per cent respectively, against the Singapore dollar (SGD), giving rise to foreign exchange gains, which were eroded partially by the depreciation of foreign currencies such as the Japanese yen, which weakened by 7.3 per cent.

Focusing on these numbers misses the larger point about how MAS's investments have performed, said Mr Menon.

It is important to look at underlying investment gains, holding SGD exchange rate constant to strip out currency translation effects, he said.

When this is done, for FY2013/14, MAS posted investment gains of S$10.6 billion, comparable to S$9.4 billion for FY2012/13, he said.

"MAS's investment gains have been relatively stable," he said. "This reflects our conservative investment strategy, which balances the need to hold sufficient liquidity to support the conduct of monetary policy with the aim to preserve the international purchasing power of the foreign reserves.

"MAS's portfolio is well-diversified with a risk profile that is commensurate with our role as a central bank," he said.

MAS's total expenditure increased to S$0.92 billion from S$0.82 billion, as investment, interest, and personnel costs rose during the year.