Singapore's Central Bank Warns of Potential Risks in Tech Sector Valuations

According to PANews, the Monetary Authority of Singapore (MAS) has issued a warning regarding the elevated valuations in the technology sector, highlighting potential risks. In its annual Financial Stability Review released on Wednesday, MAS noted that certain stock market valuations, particularly in the technology and artificial intelligence (AI) sectors, are relatively high. The report cautioned that if optimism about AI's ability to generate future returns diminishes, it could lead to a significant market adjustment and increase defaults in the private credit market. MAS emphasized that much of the stock market's gains have been driven by AI-related investments, resulting in many investors significantly increasing their exposure to the information technology sector. The report also pointed out that some large tech companies are using new or potentially cyclical private financing structures to support their expansion, which places additional revenue pressure on certain AI enterprises. The central bank highlighted the ongoing divergence between stock market valuations and the downside risks to economic growth. This misalignment suggests that any market shock could result in a disorderly adjustment.