“Borrowing for investment or spending is par for course, particularly if you have a strong balance sheet and a strong credit rating,” said ex-international banker and prominent economics commentator Chris Kuan. He was responding to criticisms hurled at Temasek Holdings for its launch of its first public bond offer to retail investors, with a five-year maturity and a fixed interest rate of 2.7 per cent.
Temasek announced that it is offering retail investors up to $200 million with the 5-year bond and that there is another $200 million placement for institutional, accredited and other specified investors.
The T2023-S$ bond is issued through Temasek’s wholly-owned subsidiary Temasek Financial (IV) Private Limited, under its S$5 billion Guaranteed Medium Term Note Programme. The total offering is subject to an option to upsize the issuance to $500 million, in the event that the public and/or placement offer is oversubscribed.
Temasek chief financial officer Leong Wai Leng said: “We are pleased to offer Temasek bonds to retail investors for the first time. This helps Temasek to broaden its stakeholder base and provide Singapore retail investors the opportunity to participate in another retail product … We issue Temasek Bonds as public markers of our credit quality – this is very much a part of our financial discipline as a long-term investor. They also increase our funding flexibility.”
The offer opened on Wednesday at 9 am, and closes on Oct 23 at 12 pm. The bonds are expected to trade on the Singapore Exchange on Oct 26.
Kuan said that netizens who claim that “government is bankrupt!” and “we have been conned!”, are wrong.
Kuan added that borrowing for investment or spending generates revenues and increase return on equity. He said that the Singapore Government also borrows to invest through its Singapore Government Securities and Special Singapore Government Securities programme, and that such programmes are worth at over $400 billion.
Kuan explains that at 2.7 per cent, the new Temasek bonds are just 35 basis points over equivalent Singapore Government Securities.
Kuan said that those that are looking for safe investments, should pick up Temasek’s 5-year bonds. But that it was not a good buy for those that prefer more risk for more returns.
“And by the way nobody is putting a gun to your head and tell you buy,” Kuan said.