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SINGAPORE: The Monetary Authority of Singapore (MAS) reported a net profit of S$20 billion (US$15 billion) in the financial year that ended on Mar 31 on the back of strong investment gains, it said in its annual report released on Tuesday (Jul 28).<\/span><\/p>\n Taking into account the S$1 billion contribution to the government’s consolidated fund, the figure is the central bank’s third highest net profit on record.<\/span><\/p>\n Attributing the latest results to a global economy that remained resilient to repeated shocks and to financial markets that performed well, the central bank’s managing director Chia Der Jiun said global financial conditions have been benign so far and equity market valuations are high despite recent pullbacks.\u00a0<\/p>\n During the financial year, all asset classes across bonds and equities, developed and emerging markets, posted good returns, said Mr Chia in a press conference.<\/p>\n For the latest financial year, MAS recorded investment gains of S$39.8 billion, partially offset by negative currency translation effects of S$16.4 billion from the Singapore dollar strengthening against the US dollar and Japanese yen, and net expenses of S$2.4 billion.<\/p>\n The expenses were partially incurred from MAS\u2019 money market operations to manage banking system liquidity.<\/p>\n “While investment gains vary from year to year, this year’s upturn was similar to last year’s and above our 10-year historical average of S$18.3 billion,” said Mr Chia.<\/p>\n The central bank’s board approved a return of S$2.5 billion to the Singapore government. “The amount to be paid to the government reflects the offsetting of losses accumulated from previous years,” he said.<\/p>\n Before this year, the last time MAS contributed to the consolidated fund was in the financial year 2020\/2021. Last year, MAS reported a net profit of S$19.7 billion and did not make a contribution to the consolidated fund.<\/p>\n Despite this, Mr Chia characterised the ongoing artificial intelligence investment boom as a “major uncertainty to the benign picture thus far”.<\/span><\/p>\n While these AI investments continue to boost economic growth in the near term, the situation is less certain in the medium term, since large equity and debt financing will be needed in the years ahead, he said.<\/span><\/p>\n “In the race for model advantage and to scale adoption, projected investments by hyperscalers and model builders have expanded beyond cashflows and commercial revenues,” said the MAS managing director.<\/span><\/p>\n Global growth, investment and financial market performance have become highly dependent on projections of data centre and semiconductor investments continuing well into the future, said Mr Chia.<\/span><\/p>\n “The sustainability of AI investments is thus highly consequential for global growth and financial stability,” he said.<\/span><\/p>\n He then described two possible scenarios in the medium term which can have a sizeable impact on the global economy.<\/span><\/p>\n If revenue growth accelerates and productivity gains broaden, the investment boom could be an extended one, but there are also risks on the path of AI investment monetisation, he said.<\/span><\/p>\nUNCERTAINTY OF THE AI INVESTMENT BOOM<\/h2>\n