Apart from portfolio management and marketing activities, companies now carry out middle-office functions such as regional trading and research. Others have centralised regional back office operations in Singapore, making full use of our efficient infrastructure, conducive business environment and stable political climate. MAS also made a major effort to develop Singapore’s capital markets. A cornerstone of this effort was the easing of restrictions on the lending of the Singapore dollar $ to non-residents. Originally, banks required MAS’ permission for any form of lending to non-residents above $ 5 million. This blanket restriction effectively discouraged $ speculation, but it also stifled the growth of capital markets. Starting in 1998, we progressively refined the restrictions to focus more sharply on lending for the purpose of $ speculation. We lifted restrictions on the trading of $ derivatives like futures, options and cross-currency swaps. We allowed non-residents to raise $ funds through debt and equity  BIS Review 39/2004  1  issuance. Eventually the policy changed so substantially that it was no longer apt to describe it as the non-internationalisation of the $ So in May this year we renamed it the policy on the lending of $ to non-resident financial institutions. Consequently, our capital markets have broadened and deepened. The debt market has matured significantly, and now provides a cost-effective alternative funding source to a diverse range of local and foreign borrowers. The SGS yield curve has been extended from 7 to 15 years. Some statutory boards have even issued bonds up to 20 years in tenor.

The corporate debt market has quadrupled since end-1996 with $ 103 billion of corporate debt securities outstanding as at end-2003. Debt issuance has increased substantially from only $ 5.4 billion at end-1996 to $ 67 billion in 2003, a compounded annual growth of 43%. The profile of debt issuers has also changed. Statutory boards used to dominate, but now form only 3% of total issuance. Instead, the debt market has a stable base of large corporates and financial institutions issuing bonds well over $ 1 billion in issue size. This has increased liquidity in the secondary market. Large international issuers such as IFC, Freddie Mac, Fannie Mae and ADB, which can tap any market in the world, have chosen to raise funds in Singapore. Treasury markets have also stayed buoyant, as Singapore remains one of the established leading global FX trading centres. The creation and hedging of structured products have boosted turnover in derivative markets. Singapore now ranks 6th globally, in OTC FX and interest rate derivatives. Reforms were also introduced to deregulate the stockbroking industry. The industry has consolidated, operating more leanly on much lower commissions. The bigger local players have expanded their product range and also expanded overseas. More foreign players have entered the market. Overall, investors have benefited from lower trading costs. SGX became the first demutualised, integrated stock and derivatives exchange in the Asia-Pacific in December 1999. It is now well placed to grow its business, and respond to developments in regional capital markets.