Market may correct but no shadow of crisis: SM

Published July 6, 2007

Market may correct but no shadow of crisis: SM

Lessons learnt, bonds forged in '97 financial trauma

By CHUANG PECK MING


(SINGAPORE) Monetary Authority of Singapore (MAS) chairman Goh Chok Tong does not see a financial crisis coming, even if there's some correction in the stock market.

'I don't think a financial crisis will happen,' he told the British Broadcasting Corporation in an interview marking the 10th anniversary of the Asian financial crisis. 'But whether the stock market will continue to go up and share prices go up the way they have gone up, I don't know.'

Mr Goh, who is also Senior Minister, does not think the government should interfere in the stock market.

'Should the authorities warn? The market has got to decide, provided the information is there,' he said. 'People know the price-earnings ratio, they know the worth of a particular stock, whether the thing will go up. We'll let them decide.'

But there could be a correction at some point of time, Mr Goh said in the interview which was televised yesterday morning. No one can tell when, though. '(But) let the market decide.'

He said the government is 'quite confident' that banks would not be hit even if their share prices were to fall. 'They are not overlending, they are not overcommitted.'

The 1997 Asian financial crisis - in particular the sharp fall in the Thai baht that triggered it - had come as a shock to the Singapore government, said Mr Goh, who was then prime minister. But the countries hit have learnt their lessons.

'All countries have learnt that they must have good corporate governance and they must have transparency for their financial transactions,' he said. 'The data must be there for the people to decide.'

According to him, Singapore has emerged from the crisis 'more noteworthy' in the eyes of investors and its standing as a financial hub enhanced further - thanks to the relatively small depreciation of the Singapore dollar and the steps the government took in dealing with the crisis.

'We impressed upon investors that we knew how to handle the situation and this is a very disciplined society,' he said. 'We were able to swallow the bitter pill in order to recover from the crisis. So, the way we recovered, the way we handled the crisis, I thought, gave us some good points insofar as our standing as a financial centre was concerned.' The crisis has also brought the Asian region together - and they have put in place contingency plans should something similar occur, Mr Goh said. 'The countries which were less hit were rallying together to help the countries which were very badly hit.'

When Thailand was hit, Singapore, among others, pledged US$1 billion as part of a line of credit to be extended by the International Monetary Fund. It was also in the forefront to help Indonesia when the country was next hit.

'Even Malaysia, which was quite hit by the crisis, also pledged in a smaller way to help Indonesia,' Mr Goh noted.

'So, that sense of getting together was very important for us - that when one country was in trouble, others rallied behind the country.'