What Does the MAS’s Latest Monetary Policy Stance Mean for Investors?

On Tuesday, the Monetary Authority of Singapore (MAS) released its Monetary Policy Statement and announced that it would be maintaining its “policy of a modest and gradual appreciation of the S$NEER [S$ Nominal Effect Exchange Rate] policy band.” This policy has remained unchanged since April 2012 and would be reviewed again when the MAS releases its next Monetary Policy Statement six months later (the statements are issued on a half-yearly basis).

MAS’s latest policy stance comes after the release of advance estimates by the Ministry of Trade and Industry which showed that Singapore’s gross domestic product (GDP) had grown by 2.4% in the third quarter of 2014 on a year-on-year basis. This is lower than the expected growth rate of 2.8%

In MAS’s Monetary Policy Statement, the central bank also gave its outlook on inflation in Singapore for this year and 2015; it expects inflation to remain low partly due to the softer property market here, which has negatively impacted rent increases.

With this slew of new short-term economic and policy data, what does it mean for you as an investor?

Actually, it means nothing much. If you are focused on the long-term business developments of the companies you’re interested in, expectations of short-term changes in the economy would actually have little to do with how your investments develop.

For example, let’s say you’re thinking that the growth in the telecommunications industry is still far from over. It’s not an unreasonable thought as there might be many more ways in which mobile devices can penetrate our daily lives. For instance, mobile devices might just become our new e-wallets. What this means is that telecommunication operators such as StarHub Ltd. (SGX: CC3) and Singapore Telecommunications Limited (SGX: Z74) might have an even bigger role to play in our lives in the future. If you’re confident that such a transformation would happen eventually over the years, then it doesn’t really matter what changes to Singapore’s monetary policy the MAS would put in place every half a year.

As another example, let’s think of industries like manufacturing which are considered low value-added activities. As Singapore gradually transitions its economy into one powered by higher value-added activities like financial services and information technology, companies in the low value-added bracket might find themselves facing difficulties in the future regardless of how much the GDP of Singapore increases.

Foolish Summary

The main idea behind investing is finding a method to save and grow our money. Since we are mostly saving a portion of our wealth for the long-term, why should we be worried about short term changes and predictions about the economy? Instead, we should be focusing on the long-term developments of the companies we’re interested in.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.