International Business & Economy Activism by individuals who bought Swiber bonds will likely fall on deaf...

Activism by individuals who bought Swiber bonds will likely fall on deaf ears

Author

Date

Category

- Advertisement -

By: Chris Kuan

The Swiber bond debacle is not the same as the mini-bond issue a few years back, even if DBS is involved in both. Not all high yield interest bearing securities are junk bonds (as claimed by an article published in The Independent Singapore (TISG) titled, “DBS helped sell junk Swiber bonds to public“).

The mini-bonds were a Lehman Brothers credit derivative embedded into a DBS note – the risk was always to the weakest part of the transaction (i.e. Lehman Brothers).

Therefore investors are far more at risk to Lehman even though the note is issued by DBS. I do not see a problem in distributing a straight Lehman Brother bonds to retail investors because the risk is clear. But the layering of risk in the mini-bond will not be understood by and pop, therefore ought not to be distributed to retail investors. This proved to be the case when Lehman defaulted.

- Advertisement -

On the other hand, the Swiber bonds were straight bonds. The risk is clear, no bells and whistles, like the mini-bonds. As several TISG readers have noted, being distributed to accredited investor with thresholds of income ($2m) and minimum certificate size ($250,000) is not the same as saying it is sold to the public.

This is vastly different from the mini-bond issue. Regulatory safeguards for accredited investors are not the same as those for retail investors.

Nevertheless as I said yesterday in my article titled ‘DBS should be criticised for selling Swiber bonds to individuals‘, they ought not be sold to individual investors, even accredited ones, because the higher probability of default means one should not invest in one high yield bond but in a diversified high yield portfolio (i.e. a specialist high yield bond fund).

The mini-bonds investors were compensated to a certain extent by DBS and other banks. Whereas in the Swiber bond issue, any compensation received by investors will entirely be due to the recovered value of the bonds (if any).

Activism by accredited investors will most likely fall on deaf ears unlike those by the minibond investors.

Please follow and like us:
Tweet
Share
- Advertisement -

No year-end bonus for civil servants; lower-wage staff to get one-off S$1,200

The Public Service Division (PSD) announced yesterday (27 Nov) that civil servants will not receive a year-end bonus payment and that lower-wage staff will receive a one-time payment of S$1,200, in view of the economic impact of the COVID-19 pandemic. In a...

Netizens ask why some employers demand to see PSLE results if they are not defined by scores

Responding to Education Minister Lawrence Wong's advise to 12-year-olds that they are not defined by their Primary School Leaving Examination (PSLE) results, some netizens have asked why some prospective employers demand to see job applicants' PSLE scores if what he said...

“A genius cut down by drugs” — K Shanmugam pays tribute to Diego Maradona

Singapore -- Law and Home Affairs Minister K Shanmugam paid tribute to football legend Diego Maradona, who passed away on Wednesday (Nov 25), and called him a "genius cut down by drugs" in a social media post on Thursday (Nov 26).   Maradona...
Please follow and like us:
Tweet
Share
Follow Me
Tweet