Thursday, June 07, 2018
TOTD: Mis-selling of Dangerous High Risk Financial Bonds to Retail Investors
Thought of the Day - Mis-selling of Dangerous High Risk Financial Bonds to Retail Investors
Just a couple of weeks ago, news broke out on Hyflux defaulting on its interest payment to the perpetual bonds it had sold to investors, which include retail investors.
Most Singaporeans do not understand what is a perpetual bond. For normal bonds, be it government or private company's bonds, they will have an expiry date. It basically means that when you buy these bonds, it promises to pay you an interest every year and at the end of 10 or 20 years, or any number of years dictated on the bond as a contract, it promises to pay you back the amount stated on the bond.
For example, there could be a $100K coupon bond which promises to pay you 5% of $100K each year for 20 years and at the end of the 20 years, it will repay you the 100K stated on bond. You may not pay $100K for the bond because it depends on the interest rates of the market. You may pay higher than $100K if the current interest rate is lower than 5%. Or you may pay lower than $100K for this bond if the current interest rate is higher than 5%. i.e. the price of this bond is inversely related to current interest rate.
Technically speaking, you can trade on these bonds. You can buy or sell these bonds before the maturity of the bonds.
What is perpetual bond then? It basically means that the company will be selling you these bonds and it promises to pay you the coupon rate, eg 5% every year but it will go on forever and it will not repay the principal amount of these bonds. i.e. it will be borrowing these money from you or other investors perpetually... FOREVER.
You can only "cash out" from these bonds by selling to other people who are willing to buy it.
The pricing of such bonds are more complex as the longer the bond maturity is, the higher risk it involves. And now, when technically speaking the maturity is infinity, aka no maturity, then the risk is extremely high.
This is why Perpetual Bonds are NOT MEANT for retail investors but more for institutional or professional investors. MAS, as the regulator of the financial market, should not even allow such perpetual bonds to be sold to retail investors!
But we now know, MAS has actually closed both eyes on such issue. Now that Hyflux has defaulted on the interest payment on its perpetual bonds, these bonds have basically become JUNK bonds in the market with little value left. The retail investors would suffer huge losses in such situation.
Ironically, Termasek Holdings under Ho Ching, has planned to sell perpetual bonds to retail investors, putting up such slogan on "supplementing CPF" earnings!
First of all, it is totally inappropriate to sell perpetual bonds to retail investors.
Secondly, how could a Sovereign Wealth Fund issue such a bond?
Last but not least, 4.5% may look comparatively attractive to the 2.5% or 4% given by CPF, but the amount of risk in perpetual bonds are very much higher! Normally, such bonds are sold at a discount to institution investors but it seems that it is more lucrative to sell to inexperience retail investors at higher price or at its principal value because they do not understand the risks they are taking!
Considering the Prime Lending Rate is at 5% now, the interest for Perpetual Bond should be higher than this rate because, it is basically a loan for forever which will involve greater risk!
Termasek Holdings, as our Sovereign Wealth Fund, is actually taking advantage of Singaporeans, by borrowing from them below Prime Rate with indefinite maturity! Try asking any banks to lend to you $100K FOREVER at prime rate and see what you get from them!
Truly, I must warn all Singaporeans not to be taken advantage by our very own Sovereign Wealth Fund. I do not know why they need to raise funds through perpetual bonds when they are already handling so much funds up to the hundreds of billions but with the opaque manner in which they run their business, the risk is even higher than one could imagine.
Risk arises when there is uncertainty with lack of transparency and information. Please do not be fooled by such "good investment opportunity" sales talk. Else, you may end up like those Minibonds victims, die liao also don't know why and MAS will just brush you aside.
Goh Meng Seng
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There are some bonds which have a lot of risks the, so one should invest after proper research. for better result
At many stages in personal life faith seems not there just when it is needed the most. Illness or death in the family, financial setbacks, depression and loss of a job.
PM Lee have all the different roles in his life. And each of his role he dispenses with responsibility and effectiveness. He speaks clearly and fluently in three languages. Those upcoming ones do not even have half of what it takes to be a PM. The self-renewal process must also include balancing dimensions of physical, spiritual, mental and social,emotional. Once he is not able to lead, our candle will not burn as bright. The real reason people dislike listening to him was certain characteristics is like LKY's and mannerism is like seeing LKY all over again. Sad
Not easy to hold a cabinet, family, people and a country together.
All his kayu ministers make downright kayu policies and kayu approved the kayu policies.
MAS, the Ministry of National Development and the Ministry of Finance are closely monitoring developments in the residential property market and remain committed to ensuring a sustainable market, he added.
In the business and as a creative executive, if you don't take risks, you're dead in the water. Calculated risk taking is essential for success. No one said it was easy. Nancy Dubuc
'Euphoria' in Singapore Goods & Services Tax hikes calls for caution.
Closely monitoring developments in public housing should be affordable?
Closely monitoring the safety of public housing where dangers of lifts malfunctioning and god-knows-what dropping of from high places?
Closely monitoring where the poor souls risked lives in dangerous jobs for bread & butter?
Closely monitoring why everything is overly-controlled in the wrong area?
Closely monitoring why couples are not having babies?
Closely monitoring why high land sales have to be in reserves if there is any?
So please go and rot in hell?
Singtel:-
We are experiencing high volume. Estimating waiting time is 15 to 30 minutes otherwise
24 hours a day when dialing hotline.
Some of us are priority customers, we got a different hot line number. just press ic number followed by # key usually operator will answer within 5 minutes. Singtel.
Scaring off international investors to invest here. They come here because they see stability.
Stability was what our fame was and built by the Kuan You regime. People wants to see consistencies even if it means buying a holiday house here and coming a few times a year to spend their riches for the country. COES are dipping. This is evidence that the country is not doing well. The one and only beneficiary on the latest round points to 5% increase in collection all the way round in big money. The youngsters are adaptable creatures. They will and can live anywhere in the world. What is so special here anymore other than safety and non-corruption? Kuan You is being betrayed by ruthless politicians. Don't put country and people and boxes till one is dead!
*Citizens who feels disassociated isn't going to be committed to their country.
*Respect its people is a powerful motivation force.
Blame everything and every one else for exuberance-and they'll defend the correctness of their actions.
Funny, isn't it, how human psychology works?
Don't sue hor take this as fake news on some of the scenarios here.
To feel powerful and important showing that they have done deep work, they present the boss with why it should be done their way. The boss himself has his shortcomings. He lack intellect that LKY, had to counter questions. Or if he kept rejecting their proposals, they might step down one by one as having accumulate enough to retire richly.
Some people have done some bashing here on properties and to feel important, they bashed back with harsh vengeance.
If teachers are being charged for parking, could they be desperate for funds?
Are they getting extra funds ready to give away near elections?
Could it be that a small dose of speculators are back when SSD was change from 4 to 3 years as a few launches were sold out, but advertisements on websites were out for sale plentifully?
Some ministers just don't want a good relationship with properties and find it hard to relinquish control.
Not defamation hor, don't sue. Cool than hot. Hot than cool. Unpredictable like the weather.
I do not have a problem with the extra absd. Will use my son's name. One has yet to buy his first property. He is willing to sign at the law firm:
I am holding the property on behalf of my parents, and not allowed to sell it for cash no matter how I need the money and would only be bequeath to me on both their demise.
If I were to marry and it be the matrimonial home my future wife has no right to fight for share of the house.
Solved! Why make such a big deal about the mess.
Nobody likes property prices to be high or lack of action in the market. Nomber one once mentioned with all the planning and the possible rise in GST as money has to come from somewhere. Therefor what was done a few days ago could be their last resort. We can imagine the ailing health in the property market no action means no collection of GST, development charges, taxes, stamp-duty, reserves from GLS...... The 5 percentage points they would be collecting from every party may not be able to make up from what would be lost in the properties action. Though there is affordability in Executive Condos, but in face-value its name is still HDB.
Lets just hope that other form of taxes will not rise to cover the cost of what is being lost in the coffers witch is some exorbitant sums of money.
(I do not have a problem with the extra absd. Will use my son's name. One has yet to buy his first property. He is willing to sign at the law firm:
I am holding the property on behalf of my parents, and not allowed to sell it for cash no matter how I need the money and would only be bequeath to me on both their demise.
If I were to marry and it be the matrimonial home my future wife has no right to fight for share of the house.
Solved! Why make such a big deal about the mess.)
I WILL CHECK WITH THE LAWYERS IF THIS IS ALLOWED. IF IT IS THAN IF EVERYONE START DOING THEY WILL COME OUT AND CLAMP! THEY THINK THAT DEVELOPERS,BANKS & ENBLOC SELLERS ARE MAKING MONEY SO THEY SO SO MUST MAKE TRIPLE! IMPRESSED!
Bringing down prices should not be the same as killing the market.
Who is more suay the countries solving problems by being corrupt or just keep sucking money from the people non stop?
After our starhub contract ended, we switched all to one of Singapore's largest company for convenience . After all was installed the wifi router etc, it failed to work as promised and the tv kept freezing up. This service provider sent their men a few times, each time a different person who told us a different theory. We were not sure if it was outsource as the men had the company's logo uniform over their own clothes. At the 5th round of different men to and fro , they suggested hard cabling.
We were given a brochure on the estimated costs per metre of cable. The contractor sent by the service provider came on the 6th round and quoted us almost double the cost per metre cable citing that the price given to us was for single level and our house is double storey. We suggested if it was possible to run the cable exteriorly into the bedrooms so as not to be seen as untidy. He insisted on doing it through the stairs. We went back personally to the service provider and made a complain that the prices quoted on their brochure was misleading and that it should stated was only for single level. They said that they would look into it.
They sent us another cable man accompanied by a company's man,7th round. This time they agreed to hard cable externally into the bedrooms with a reduced charge. Its two months now and things are working well.
Herd animals instinct is sticking together with the pack is the high route to survival.
They tend to follow the same fads at the same time, but what may be safe behavior can be suicidal in business behavior. Often it is safer to be wrong collectively than right individually.
The leaders show a consistent preference over loyalty than competence. Below performers tends to stay on a team longer than a disloyal one. Leaders may say they want challenge, insight and people able to 'think out of the box'. They only fool themselves. You will be seen as disruptive and you will not be seen as a team player.
Will it be better to hire people for their technical skills than political skills? Why does innovation tend to come from outsiders? The insiders playing a safe game to protect themselves with champagne and caviar lifestyle. Why risked all by not being in the herd?
[Allow a couple to take up a longer housing loan provided that a 30% down payment for deposit is justified. This will enable them to purchase a bigger home for kiddies and helpers with comfort - undilute their money for other expenses.
When the children are grown up they will purchase their own home -and move out or they can take over the mortgage.
When the children move out -the couple can than purchase a smaller unit and redeem the loan. Win win situation for couples and their children]
We were lucky 30 plus years ago when we put 38% deposit on a 1.3 million house. The foreighn bank had all the freedom and knew what they were doing. We were given the loan up my 85 years of age. Our mortgage outlet was low and the banks earn more interest with a longer loan with an interest at around 6%. We had extra money to send our children to an overseas education. 4 years ago our last youngest daughter moved out to Punggol after marriage. We sold our large property one year after at 3.6 million with a loan of around a quarter million left. After the redemption we still had cash of 2.6 million minus the CPF. We paid cash for a 2 bedroom unit and had 600 thousand for retirement.
In between those 30 plus years we were out of work for a few months a few times we only had to pay interest.
@ above.
The banks used to have such mortgage loans years ago, but only for FREEHOLD properties.
Who cares! Its always has been me first, me second me last. Its all about me me and me.
Could GCT return to do a Mahatier ? ? Could LHL plus TCH become ESM??
New Chief new Indians?? During his time his promotion was Swiss living and gracious society??
No gst or abcd and the country was thriving. We seriously nid it now. Rot is seeping in.
He not only promote Swiss living n gracious society. He also promote compassion. Graciousness n compassion promotes a less stress society. What point when rich n successful but only looking out for oneself. Fights n punches have become the norm?
How many politician's children will be coming out as first-time private-property buyers? Seriously and it won't be HDB,right? Some things happen for a right reason!
(But we now know, MAS has actually closed both eyes on such issue. Now that Hyflux has defaulted on the interest payment on its perpetual bonds, these bonds have basically become JUNK bonds in the market with little value left. The retail investors would suffer huge losses in such situation.)
The Managing Director is very safe in what he do or not do. His Chairman is his colour.Speaking same lingo.
(Termasek Holdings, as our Sovereign Wealth Fund, is actually taking advantage of Singaporeans, by borrowing from them below Prime Rate with indefinite maturity! Try asking any banks to lend to you $100K FOREVER at prime rate and see what you get from them!)
I cannot comment on Temasek's chief as we only hear rumours. On few occasions I came face to face with her, she struck me as someone who is bashful like her husband. If rumours are true than she should be safe as husband and wife speak same lingo.
Rather than selling land to private developers, they could use the land to build private housing for the people cheaply. Discard all the conditions for ECs. If private developers prices are not attractive enough compared to government's private condos, they will not be able to sell and would have to lower their prices. Keep the SSD to 8 years and remove all the ABSD and make a fixed stamp duty at 5% for Singaporeans and 10% for foreigners. Discontinue all the flip-flopping. Another option is to build public housing like condos.
Developers are not here to do favors. They are doing businesses. It is the duty of the government to provide affordable housing to the masses. People want good paying jobs and comfortable homes, not drone serving food or smart city. What is the point of having smart city when some of the policies are so ridiculously hindering?
One of the principle -centered MP is from a minority race. She will script what was to be appeal on the computer and allow you the access to go through it before it will be send to the right authorities.
Olympic skaters are being used to be synchronized swimmers.
Why we need a smart city?
When the main breadwinner losses his job, his pockets will be automatically be fill with money.
When any person try murdering another, his weapon will automatically be turn plasticky.
When vehicles were about to crash or hit a pedestrian, it will automatically stall.
When your mouth is watering for durians, it will automatically appear on the dining table.
When one are not happy with HDB, a palace will automatically appear.
When one is on death bed, they will be automatically given a new lease of life.
That everyone will love, so as there is no hatred.
No hospitals and doctors as no one will be bad health.
Who said we don't want a smart city?
[Rather than selling land to private developers, they could use the land to build private housing for the people cheaply.]
This type of idiot dare to propose such a scheme. It you are the government would you do it with less billions in collection and additional headache?
"Who are they?"
"They are the ruthless and calculating guys."
"Can we prove that it may be a criminal act of overcharging to make the country one of the most costly for court cases?"
"Not really. Only sometime back, the fees were reduce from 1 mill to a few hundred. Too with Susan Lim's case. We are not experts in examining, but according to exPM GCT, he was earning about 2 mill a year."
"Problem is they only attract the expensive ones. Its like their choices are so limited. What a few think are the good ones, might not sit with what others think?" "Whatever, glad you people think the same as us. Time on this earth is expensive. All we ever wanted are meaningful lives. Lets talk about something else."
"OK see you guys soon."
The most powerful in the world. Rumor is that tough & goofy Trump went in because of enough money? Perhaps they are not looking in the right direction? Fetish on just lawyers, doctors & army generals? A license to practise outdated preference? What about business-men who have the experience of earning money for the country? What about psychiatrists who understand the people's emotions and needs.
" The stupidity of people comes from having an answer for everything. The wisdom of the novel comes from having a question for everything. Milan Kuning"
Plenty of people are motivated by big salaries, an impressive title being part of a prestigious company or status. By contrast most leaders are motivated by deeply embedded desire to achieve for the sake that they are doing something of achievement even if it means it may not be needed.
How can we identify leaders who seek out creative challenges, passion and great pride in an unflagging energy to do things better
.
Another identification of good leaders that they are persistent with their questions about why things should only be done such a way, and have the eagerness to explore new approaches.
Business Law taught us that superior leaders should be able to find common ground for all sought of people which but sadly they only saw what the computer put out to them should be right.
If one only hear it from less than 100 people, its intriguing. Keep hearing from people whom
we didn't know before, on weekly basis about similar opinions or testimonials are far more
credible than any source. It is self-reinforcing and it has to be true.
Doctor- "I loathe the internet."
Another- " In today's world most cannot function without it?"
Doctor responded- "My patients get their information, most of which is dubious quality and challenged me with the information which they found online."
He did it as he considered it was his duty not for any financial benefit, better to live in his own private space and to continue living frugally as was his upbringing slippers and all. Whether he does right or wrong is all a matter people's perception.
The biggest issues we have today - the atas ministers will never go to the ground to get an understanding on what the actual events on the heat stroke fatality? They depended on reports sent by SAF superiors on what as to be answered in parliament? We already knew. They do not take their ministerial jobs seriously as they have accumulated enough money. Parliaments is just a place to stage wayangs. Trust has been long dead since LKY.
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