2022 Recap: The Top 10 Financial News That Shaped the Year

#1 - Russia invades Ukraine 

The Ukraine crisis caused a surge in the price of commodities from oil to wheat. 

The Russian invasion of Ukraine brought about significant humanitarian and geopolitical impact, but its effects in the financial markets were also felt through driving up commodity prices. 

Ukraine was the world's seventh-largest producer of wheat in 2021/22, accounting for 10% of the world wheat market. It also accounts for 15% of the corn market and 13% of the barley market. 

Grain deliveries were initially suspended as a result of Russia's blockade of Ukrainian ports, fueling fears of shortages worldwide and price hikes. 

Russia is also a significant player in the global energy market and is one of the top three crude oil producers in the world. The country is also the second-largest producer of natural gas in the world and has the largest natural gas reserves. 

By mid-May, prices for commodities from wheat to oil skyrocketed to multi-year highs. This fuelled a surge in inflation when prices were already rising from Covid-19 led shortages. 

#2 - Inflation soars

US consumer prices rose by 9.1% from a year ago, driving concerns about persistent inflation.

The Covid-19 pandemic and rising commodity prices have both contributed to higher inflation.

This caused consumer prices in the US to rise by as high as 9.1% in June compared to the previous year. 

The good news is that inflation has finally started to ease in recent months, with consumer prices rising by just 7.1% in November compared to the previous year. 

Likewise, Singapore's core inflation slowed in November after eight consecutive months of growth. 

While inflation is easing, it doesn’t mean that price increases will slow down sharply. The Monetary Authority of Singapore (MAS) expects headline inflation to be 5.5-6.5% in 2023, following an increase in consumer prices of close to 6% this year.

#3 - Fed hikes interest rates

The Fed raised interest rates by seven times this year.

The Federal Reserve (Fed) implemented seven interest rate hikes ranging from 0.25% to 0.75%. [6] 

This marked a major reversal of policy for the Fed, which had kept its benchmark interest rate at close to zero as recently as the first quarter of 2022. 

Despite signs of cooling inflation in recent months, the Fed is still projecting that there will be more interest rate hikes to come in 2023.  

In fact, Fed Chairman Jerome Powell has made it clear that we will not see interest rates coming down anytime soon. 

He said in the December press conference that “I wouldn’t see us considering rate cuts unless there’s confidence that inflation is moving down to 2% in a sustained way.”

#4 - Interest in government bonds soars

The yield on the Singapore 6-month T-bill reached 4.4% p.a., the highest level in more than 3 decades. 

This was the year that more Singaporeans learnt more about Singapore Savings Bonds (SSBs) and T-bills.

With higher interest rates and an uncertain economy, investors flocked to these lower-risk investments that offered a more attractive return compared to the past. 

The average-10 year interest rate on the SSB reached a high of 3.47% per annum in the December issuance of the SSB.

Likewise, the cut-off yield on the 6-month T-bill reached a 3-decade high of 4.4% annum in December. 

It is no wonder that there were more than 95,000 bids amounting to close to S$14.2 billion for the T-bill auction when demand was the highest in November. 

#5 - Luna collapses

The collapse of Do Kwon’s Terra network wiped out US$ 60 billion in the crypto market. 

For most of the recent upcycle, Terra (LUNA) and its stablecoin TerraUSD (UST) were seen by many as the success story in the world of cryptocurrency.

However, this reversed quickly when a run on LUNA led to close to US$ 60 billion being wiped out from the collapse of LUNA and UST. 

The selloff in UST also led many to question how “stable” a stablecoin is actually. Stablecoins are supposed to be stable because they are pegged to a fiat currency (eg USD). 

However, there can be different ways that each stablecoin is backed. Different stablecoins also have different amounts of reserves to back them up.

While the collapse of Luna led to renewed scrutiny on Tether (USDT), it remains the largest stablecoin for now even as confidence in cryptocurrencies are significantly weakened. 

#6 - FTX collapses

Sam Bankman Fried’s crypto exchange FYX collapsed over a period of 10 days. 

Crypto exchange FTX, which was once valued at $32 billion, filed for bankruptcy in November. Within the span of a few days, FTX’s founder and CEO, Sam Bankman-Fried, saw his net worth drop from $16 billion to nearly nothing.

The collapse of FTX sent shockwaves through the crypto industry, which was still reeling from Luna’s collapse earlier in the year.

Questions were also raised on the due diligence process of investors in FTX. Temasek, an investor of FTX, will write off its US$275 million (S$377 million) investment in FTX, “irrespective of the outcome of FTX’s bankruptcy protection filing”.

As the bankruptcy proceedings for FTX started, it is becoming apparent that there were major failures in corporate governance at the company. 

FTX’s new CEO John Ray described a “complete failure of corporate controls”, identifying lapses in corporate governance greater than any other process he has managed in his 40 years as a bankruptcy specialist, including at Enron. 

#7 - China re-opens

China announced 20 measures to guide re-opening, representing a move away from its “zero-covid” policy.

China’s re-opening caught many by surprise, after some have deemed the Chinese market “uninvestable”  and the China Communist Party meeting gave investors little hope of a change in policy.

Within the span of two months, the Chinese government quickly moved away from its zero-Covid policy by ending mass city-wide lockdowns, requiring those with mild symptoms to self-isolate, and then relaxing quarantine restrictions for international travellers. 

These measures mark a major reversal for the world’s second largest economy which has been effectively cut off from the rest of the world since the Covid-19 outbreak. 

Officials are hoping that they could help to boost the domestic economy which has been experiencing a significant slowdown. Exports and imports for the month of November declined at their fastest pace since February 2020.

The easing of border restrictions could open up a significant source of tourists for many parts of the world and provide a boost to the global travel industry. 

#8 - Elon Musk acquires Twitter

Tesla’s CEO Elon Musk made an offer to buy Twitter for $44 billion.

There has hardly been a week without Elon Musk, Tesla and Twitter in the news in 2022.

One of the biggest moves Elon Musk made was the acquisition of Twitter for $44 billion. 

Shortly after taking control of Twitter, Musk initiated broad changes, including dissolving the board of directors, removing several executives, charging users for the privilege of having a blue tick, and laying off employees. 

However, the acquisition has not been kind of Musk’s wealth. His net worth is to have fallen by more than 25% since the start of the year according to Bloomberg. 

The purchase of Twitter has weighed on Tesla’s share price as Musk had to repeatedly sell Tesla shares to fund the purchase, and investors worry that Musk will be distracted from his leadership role at Tesla.

#9 - Merger between Singapore offshore giants

Sembcorp Marine announced a merger with Keppel Offshore & Marine to build a global player in offshore renewables and new energy.

After years of speculation, the much-anticipated merger between Sembcorp Marine and Keppel Offshore & Marine (O&M) was finally announced this year.

This will involve Sembcorp Marine acquiring Keppel O&M directly from Keppel. Shareholders of Keppel will then hold on to shares of Sembcorp Marine. 

By combining the two entities, Sembcorp Marine could become a global player in offshore renewables and new energy. 

The transaction will also allow Keppel to accelerate on its Vision 2030 transformation and improve on its balance sheet. 

The Extraordinary General Meeting (EGM) is expected to be held in January. If the transaction is approved and the merger takes place, Sembcorp Marine will remain listed on the SGX. 

#10 - SATS acquires Worldwide Flight Services

The purchase could make SATS the world’s latest air cargo handler. 

SATS announced the proposed acquisition of Worldwide Flight Service (WFS) for approximately €1.177 billion (S$1.6 billion). 

WFS is the world’s largest air cargo handler with its footprint largely focused on America and Europe. 

SATS believes that the acquisition would be complementary to its current exposure largely in Asia, and create a global leader in the aviation sector. 

While transaction is expected to be immediately financially accretive, investors have not taken well to the transaction. SATS’ share price fell sharply after the acquisition was announced. 

The transaction will be funded by an equity fundraising of S$1.7 billion, including a rights issue to shareholders. 

SATS subsequently shared that it would raise up to S$800 million through the rights issue, which will be launched in the first quarter of 2023.