Q1) Discuss in what ways Temasek’s bond issue has helped deepen the bond markets in Singapore.
Temasek holding, being the investment arm of the Singapore Government, credited AAA by Standard and Poor, Aaa by Moody's have been view by many investors as a "well known" corporation. With the current low interest environment, many investor are on the look out for "good buys". Temasek's bond definitely falls into that category.
The bond market in Singapore has existed since 1960s but, Temasek is the first corporation to issue such 40 year bonds. Temasek holding had also issued bond in US dollars, Sterlings and Singapore Dollars.
More investor, locally as well as foreign will be taking an interest in our local bond market. With the overwhelming demand for the bond, there will not be a lack of suitor in the secondary market. This creates liquidity for bond investors.
Temasek holdings also had path way for many corporation to come into the bond market. With more investor interested in the local bond market, as well as the liquidity in the second market, demand will definitely be on the rise. Many corporation will be able to issue bond to cater to the demand and raise cash for their own capital.
Though it might still take sometime for our local bond market to grow, Temasek Holdings have definitely open the door to it.
http://www.fundsupermart.com/main/sgsInfo/sgsIntro.tpl
http://blogs.wsj.com/marketbeat/2010/07/20/temaseks-sterling-bonds-shine/?KEYWORDS=temasek+bond
http://online.wsj.com/article/NA_WSJ_PUB:SB10001424052748704625004575089141725385782.html
Q2) Discuss the various risks that investors should be mindful of when investing in bonds.
Interest rate risk, refers to the value of the bond, increasing or decreasing due to the fluctuation of the interest rate. Whenever the interest rate increase, the bond value will decrease. Conversely when the interest rate decrease, the value of the bond increase.
Inflation risk refers to the risk that income earn from the coupon interest might be eroded by inflation. The coupon interest is fixed but inflation might fluctuate. Inflation risk are higher for longer term bonds.
Currency risk refers to the risk involve when converting the foreign currency-denominated bonds to the local currency. Not all bonds are denominated in Singapore dollars thus if the bonds that you invest in is a foreign currency, you will be exposed to the currency risk.
Risk of default of issuer refers to the risk, when the issuer are not able to repay the coupon interest or the pricinpal value when facing financial problems. This will cause the investor to potentially lose all of the capital invested in the bond.
Source of research : http://www.hsbc.com.sg/1/2/miscellaneous/personal/investments/bonds-risks
FIN301 Online discussion window 1 070810
Posted by
Samuel
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I am suprised by his choice of words use in the article, definitely there were Financial conglomerates like AIG and RBS that have suffered from diversifications and poor investment strategies. The 2008 financial turnoil sparkled by the collapse of Lehman has affected almost all, manufacturing, financial, service sectors were all badly affected.
There are, however, financial conglomerates which have suffered losses but not generally because of diversification. Bing Jie mention about Warren Buffett's Berkshire Hathaway is one prime example. Warren Buffett lost billions during the financial crisis but was it due to diversification or contagion from small part of the business? My opinion is that instead of divesification, it was due to the overall losses suffer during the crisis. Joyce who mentioned about confidence of investor and instuition is probably right. The fall of Lehman brother probably affected the confidence of many, causing a chain reactions from investors to consumers.
In the past it might hold true that the business strategy used on retail customers might have been product driven, emphasising transactions over relationships. In recent, years fiancial conglomerates have move from product driven to building a long term relationship. In the banking sector, you would probably see campaign like serving customer within 8 minutes, follow up within 2days. Insurance agents would probably visit you personally when you met with an accident or have a newborn in the family. All this shows that the shift has move from product driven to customer focused.
In order to keep up with competition, FIs have been offering more than just one service. Is this neccessary seem as a bad move? Take example of banks in Singapore, they are not just serving the retail customers, many of the banks are also targeting the investment and insurance clients.
Traditionally you would go to an insurance agent for insurance, investment company for investment, but the banks are working towards a all in one service provider, a one stop service as Irene call it. Take Standard Charter Bank as an example, they do not have their own insurance subsidary, but they do have a partnership with prudential. The partnership have been going on for years. If Standardard Charter Bank were to buy over Prudential, the resulting fiancial conglomerates would be able to offer clients all 3 form of service, investment, insurance and retail banking. What would you think of that?
Large financial conglomerates might be difficult to manage, but with the right experience proper regulation and supervision, things might just work.
Q2) Should financial conglomerates be allowed to continue as many critics felt that they impede competition by restricting new entrants?
You can choose to discuss one question or both questions in your posts.
You have until Sunday 8 February, midnight, to participate in the discussion. You are expected to do the following:
- Contribute at least 2 posts this week.
- Limit each post to 250 words.
- Write not more than 1 post per day.
- Make more than one point per post.
- Observe netiquette.
I look forward to reading your contributions! Please do not hesitate to e-mail me should you have specific questions on how to participate in the forum.
I hope that you’ll find this article interesting.
See you tomorrow!
All the best,
Marie-Laure
There are, however, financial conglomerates which have suffered losses but not generally because of diversification. Bing Jie mention about Warren Buffett's Berkshire Hathaway is one prime example. Warren Buffett lost billions during the financial crisis but was it due to diversification or contagion from small part of the business? My opinion is that instead of divesification, it was due to the overall losses suffer during the crisis. Joyce who mentioned about confidence of investor and instuition is probably right. The fall of Lehman brother probably affected the confidence of many, causing a chain reactions from investors to consumers.
In the past it might hold true that the business strategy used on retail customers might have been product driven, emphasising transactions over relationships. In recent, years fiancial conglomerates have move from product driven to building a long term relationship. In the banking sector, you would probably see campaign like serving customer within 8 minutes, follow up within 2days. Insurance agents would probably visit you personally when you met with an accident or have a newborn in the family. All this shows that the shift has move from product driven to customer focused.
In order to keep up with competition, FIs have been offering more than just one service. Is this neccessary seem as a bad move? Take example of banks in Singapore, they are not just serving the retail customers, many of the banks are also targeting the investment and insurance clients.
Traditionally you would go to an insurance agent for insurance, investment company for investment, but the banks are working towards a all in one service provider, a one stop service as Irene call it. Take Standard Charter Bank as an example, they do not have their own insurance subsidary, but they do have a partnership with prudential. The partnership have been going on for years. If Standardard Charter Bank were to buy over Prudential, the resulting fiancial conglomerates would be able to offer clients all 3 form of service, investment, insurance and retail banking. What would you think of that?
Large financial conglomerates might be difficult to manage, but with the right experience proper regulation and supervision, things might just work.
Q2) Should financial conglomerates be allowed to continue as many critics felt that they impede competition by restricting new entrants?
You can choose to discuss one question or both questions in your posts.
You have until Sunday 8 February, midnight, to participate in the discussion. You are expected to do the following:
- Contribute at least 2 posts this week.
- Limit each post to 250 words.
- Write not more than 1 post per day.
- Make more than one point per post.
- Observe netiquette.
I look forward to reading your contributions! Please do not hesitate to e-mail me should you have specific questions on how to participate in the forum.
I hope that you’ll find this article interesting.
See you tomorrow!
All the best,
Marie-Laure
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