Dear Mr. Tan,
I would like to respond to the following misconceptions and unfair criticisms:
1) The fixed deposit is about 1.5% in 2007 and you get 5% from minibond. You should have known better. So high differential. Still claims risk?
It is not fair to use 12 months fixed deposit rate because minibond is for 5 years. There are many low risk products offer 4% to 6% returns from the market. E.g. DBS6%NCPS, UOB5.05%NCPS, OCBC5.1%NCPS, OCBC4.2%NCPS…. If we compare the minibond with the OCBC 4.2% and 4.5% preference shares available from the stock market, which we can sell the shares anytime if we need cash, the 5% offered by minibond is not attractive because we can’t touch the money for 5 years.
2) High return high risk, since you get 5%, the risk should be high.
Many financial experts agreed that the reasonable return from long term investments (5 to 10 years) should be around 4% to 6%. A 5% return from minibond should not be considered as high as it is a long term (5 years) investment. All high risk investments are on short term basis, who would want to invest into a long term high risk product?
3) Who ask them to invest blindly on a product which they don’t understand?
Misled by the newspaper advertisements and sales brochures, many investors thought they were buying a five-year bond issued by the six leading banks. It turned out that it is a very complex product which even the sales people from the financial institutions are unable to explain clearly.
4) As a responsible investor, you should have read the prospectus before making the investment.
The minibond prospectus summary is as misleading as the sales brochures. The other parts of the prospectus give plenty of information on the credit ratings of the six leading banks which reinforce the believing that it is a bond issued by the banks.
It is also not realistic to expect an ordinary investor to understand fully the entire prospectus before making an investment. For example, of the tens of thousands of OCBC preferences shares investors, how many of them really read and understand fully the entire prospectus of the preference shares before making the investment?
5) Who would expect Lehman brothers to go bankrupt? (i.e. the risk is low at the time of selling) It is unfortunate that Lehman did fail. You have to accept it and move on.
Minibond is not a bond issued by Lehman or by the six banks. It is a high risk long term complex structure product. Who would dare to invest in a high risk product for 5 years?
Pang
Wednesday, July 22, 2009
SCMP:Investors want full refund, not 70pc
22 July 2009
Scores of minibond investors who lost their money when Lehman Brothers went bankrupt are holding out for full compensation of their principal sum and insist a proposed pay-off of up to 70 per cent is unacceptable.
A Ms Siu, 52, who declined to give her full name, purchased HK$6 million worth of Lehman minibonds from Bank of China (Hong Kong) and flatly rejected the proposal.
"This is not all right," she said. "I will continue to fight [for a full refund]."
She did not rule out accepting a 60 per cent pay-off and then taking the bank to court to recoup the rest of her investment. But she was not optimistic.
"Why can't the banks follow what Sun Hung Kai [Financial] did? How come the banks are not able to do something securities firms could?" she said.
Ms Siu said she planned to join about 100 investors at a protest at the Bank of China headquarters on Friday.
Bank of China sold most of the Lehman-linked minibonds in Hong Kong and many of the other banks are expected to follow whatever settlement terms are agreed by it. But a settlement deal offering just 60 to 70 per cent compensation is expected to be a tough sell to angry investors, who were emboldened in their fight by the 100 per cent pay-off arrangement agreed between more than 300 investors and brokerages Sun Hung Kai Financial and KGI Asia.
Democrat legislator Kam Nai-wai said whether the buy-back proposal was adopted would largely hinge on how many investors agreed to it. It was hard to predict how well received the settlement deal would be among the investors. Mr Kam said he planned to get their feedback on Sunday.
"As for the banks, if the proposed settlement cannot save them from trouble [from compensation seekers], it was not wise to take it," he said.
The Securities and Futures Commission should also explain why banks could escape from full responsibility while some securities firms could not, Mr Kam said.
Scores of minibond investors who lost their money when Lehman Brothers went bankrupt are holding out for full compensation of their principal sum and insist a proposed pay-off of up to 70 per cent is unacceptable.
A Ms Siu, 52, who declined to give her full name, purchased HK$6 million worth of Lehman minibonds from Bank of China (Hong Kong) and flatly rejected the proposal.
"This is not all right," she said. "I will continue to fight [for a full refund]."
She did not rule out accepting a 60 per cent pay-off and then taking the bank to court to recoup the rest of her investment. But she was not optimistic.
"Why can't the banks follow what Sun Hung Kai [Financial] did? How come the banks are not able to do something securities firms could?" she said.
Ms Siu said she planned to join about 100 investors at a protest at the Bank of China headquarters on Friday.
Bank of China sold most of the Lehman-linked minibonds in Hong Kong and many of the other banks are expected to follow whatever settlement terms are agreed by it. But a settlement deal offering just 60 to 70 per cent compensation is expected to be a tough sell to angry investors, who were emboldened in their fight by the 100 per cent pay-off arrangement agreed between more than 300 investors and brokerages Sun Hung Kai Financial and KGI Asia.
Democrat legislator Kam Nai-wai said whether the buy-back proposal was adopted would largely hinge on how many investors agreed to it. It was hard to predict how well received the settlement deal would be among the investors. Mr Kam said he planned to get their feedback on Sunday.
"As for the banks, if the proposed settlement cannot save them from trouble [from compensation seekers], it was not wise to take it," he said.
The Securities and Futures Commission should also explain why banks could escape from full responsibility while some securities firms could not, Mr Kam said.
Investing in gold
Dear Mr. Tan
Since bank interest rates have been very low recently, a friend has recommended me to invest in gold. The buying and selling of gold is through this company. The company’s website is (link deleted)
REPLY
I do not know if this organisation is reliable. You should not invest in any organisation that you are not familiar with. If you wish to invest with this organisation, you must do your research well. Some banks in Singapore offer similar facilities for you to invest in gold. I think that UOB is one of them. I suggest that you find out more about their offer.
If you wish to invest in gold, make sure that it is not more than 10% of your total savings. And hold it as a long term investment.
Since bank interest rates have been very low recently, a friend has recommended me to invest in gold. The buying and selling of gold is through this company. The company’s website is (link deleted)
REPLY
I do not know if this organisation is reliable. You should not invest in any organisation that you are not familiar with. If you wish to invest with this organisation, you must do your research well. Some banks in Singapore offer similar facilities for you to invest in gold. I think that UOB is one of them. I suggest that you find out more about their offer.
If you wish to invest in gold, make sure that it is not more than 10% of your total savings. And hold it as a long term investment.
Investing in a property for rental
Hi Mr Tan,
My wife and I own a HDB executive apartment, fully paid with CPF and cash.
We have some investments. We are considering to cash them for 20% down payment for a private property. We will rent the property to pay the monthly instalment.
Should we go for a second property or continue investing in equity? We are now in our 40s. It is for retirement use.
Hi
This is a personal view. It is all right to buy a property for one's occupation but not a good idea to invest in a property for rental.
I dislike investing in a physical property for the following reasons:
a) the price is too high
b) the return, after deducting expenses, is too low
c) it is a hassle to rent out the property
d) it does not offer diversifcation.
e) it is highly speculative and depends on making the right decision on timing and choice of property.
Investing in REITS may be a better idea, as it offers the same opportunity to make the same kind of potential gain as physical property, has less hassle in managing the property and offers diversification over several properties.
All the best in your decision!
My wife and I own a HDB executive apartment, fully paid with CPF and cash.
We have some investments. We are considering to cash them for 20% down payment for a private property. We will rent the property to pay the monthly instalment.
Should we go for a second property or continue investing in equity? We are now in our 40s. It is for retirement use.
Hi
This is a personal view. It is all right to buy a property for one's occupation but not a good idea to invest in a property for rental.
I dislike investing in a physical property for the following reasons:
a) the price is too high
b) the return, after deducting expenses, is too low
c) it is a hassle to rent out the property
d) it does not offer diversifcation.
e) it is highly speculative and depends on making the right decision on timing and choice of property.
Investing in REITS may be a better idea, as it offers the same opportunity to make the same kind of potential gain as physical property, has less hassle in managing the property and offers diversification over several properties.
All the best in your decision!
Bird Nest Industry in Kedah, Malaysia
I visited Padang Seria, which is in Kedah and 50 km from Penang Island. It is developing a bird nest industry. Over 100 shophouses have been converted into "bird nest house". The swiflets use the house to build their nests to raise the young swiflets.
My friend told me that a few other towns in Kedah and Johore are also developing this new industry. Bird nest has some medicinal value and is also a delicacy.
I shall be uploading some photos soon.
My friend told me that a few other towns in Kedah and Johore are also developing this new industry. Bird nest has some medicinal value and is also a delicacy.
I shall be uploading some photos soon.
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