Smaller bond notes now available

Industry players hail move as SIA launches $300m worth of bonds

Millet Enriquez

emelita@mediacorp.com.sg

SINGAPORE

Industry players also hailed the move as they believe that this is a key step towards developing the retail bond market which can further enhance Singapore’s financial sector.

Singapore Airlines yesterday gave the market a kick-start as it launched $300 million worth of five-year retail bonds at 2.15 per cent return — a first for a Singapore corporation.

The SIA bonds will be traded in lots of $1,000 and this is much lower compared to the typical corporate bond which are usually quoted in lots of $10,000 or higher.

The SIA bonds, which will be offered via public and private placement, is only the first in the series of corporate bond launches that will be made available to retail investors, the Singapore Exchange (SGX) said.

Some $50 million of the SIA bonds will be offered to the public and another $250 million will be offered to institutional investors through private placement. The public can purchase the bonds via ATMs operated by DBS, OCBC and UOB. The SIA bonds are expected to be listed on the Singapore Exchange on Oct 1.

OCBC Bank, which is one of the coordinating bookrunners for the SIA bond, says the bonds will provide retail investors an alternative instrument that offers higher yield and a steady stream of income.

“Typically, a bond pays a higher coupon than a savings account.

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In addition, in a low interest rate environment where bond prices can potentially keep rising, an investor can also look towards potential capital gains,” said Mr Nicholas Tan, head of Global Wealth Management, OCBC Bank.

But investors must also be wary of risks such as changes in bond prices in line with interest rates, he said. “Buying a bond at issue and holding it until maturity means investors must be prepared to commit their funds for that length of time.”

SGX said it is beefing up its initiatives to educate investors through a series of seminars and workshops to help them understand fixed income investments so that they can make informed decisions.

“Our initiative to develop the bond market for retail investors augments SGX’s value proposition as an innovative and leading trading hub in Asia,” said Ms Tng Kwee Lian, senior vice-president and head of Fixed Income, SGX.

However, Mr Wong Sui Jau, general manager at

Still, he believes the bonds market here has a lot more room to grow and the move is in the right direction, adding that a Singapore corporate bond like SIA’s will be attractive to investors since it’s a well-known blue chip and the default risks are low.

Over 70 investment grade corporate bonds have been issued in Singapore since the start of the year, according to data from