Singapore Throws a Hissy Fit

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By Jacob Maslow

business district of singapore
Central Business District of Singapore at night.

At first glance, Singapore is very very different from Greece. In fact, you wouldn’t mistake the two as far as financial fitness and overall financial viability are concerned. Singapore is the financial hub of Southeast Asia. It has billions upon billions of dollars in assets. There are tons of foreign companies already doing business in Singapore, or looking to do business in Singapore. Singapore is also the gateway to greater Asia as far as business expansion and corporate headquarter basis are concerned.

For Greece, on the other hand, we already know what is wrong with that economic basketcase. There is really no other word that would do justice to the economic creek that the Greek boat is headed to. It is bad news. So why is Singapore throwing a hissy fit regarding Standard & Poor’s new state-owned debt grading criteria? Singapore takes exception to S&P’s new criteria, which takes into account any companies that do not have direct ownership of assets.

This makes a lot of sense. If a state-owned investing company like Singapore’s Temasek Holdings faces a rough market, they can have a tough time selling in a market that isn’t very liquid. Also, this presents a huge amount of volatility in asset valuation.

S&P’s rating system is not drawn out of the thin blue air. There are strong financial reasons and a lot of heavy thinking that went into these rules. Regardless of Singapore’s public noises, Singapore’s AAA rating from S&P 500 might be in jeopardy.

Due to the new criteria that S&P will be basing its ratings on, Singapore is not much different from Greece. In fact, they are in the same group, with the way the government handles its assets and the risks facing those assets. Sure, the actual performance on the ground is like black and white, but that doesn’t really matter. The same structural risks apply. This is apparently the point that Singapore’s financial authorities either refuse to see or simply can’t appreciate.

These new rating criteria are sure to impact not just Singapore, but many other countries with sovereign investment arms. At first glance, you think these economies are red-hot or stand on solid footing. However, the way they structure their investments may leave a lot to be desired as far as risk management is concerned.


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