Wednesday, October 29, 2008

Mini-bond investor gives his view

Dear Mr. Tan

I would like to response to some misconceptions and unfair criticisms to the minibond holders from the general public (and probably including some of our leaders). They are :

1) W
hen Lehman brothers did not fail, these minibond holders collected their quarterly payout and kept quiet. Now they got burned, they want MAS to bail them out ?

We did not asked MAS to bail us out. What we are asking is: MAS please carry out your duty , i.e. to investigate into any mis-selling and mis-representations.

2) Since you have make a wrong decision in investment , you have to take responsibility and accept the consequences.

Many of us were misled into believing that the product we bought is a bond issued by the six leading banks (or the investment is to buy into bond issued by the six banks) namely, DBS, Citibank, Merrill lynch. Goldman Sachs, HSBC, and Standard Chartered bank. Now then we discovered that the bond is actually not issued by the six banks and worse it is not a bond, instead, it is a very complex product which even the sales people from the Financial institutions are unable to explain clearly.

3) The risks are explained in the prospectus in bold print that you can lose everything. Therefore minibond holders cannot claim that they do not know the risks

We understand that the principal amount is not guaranteed. But we are misled into believing that the bond is issued by the six leading banks(or the investment is to buy into bond issued by the six banks) and therefore if one of the six bank fail, the maximum loss is only 1/6 (16.7%) of the principal amount. We will lose everything only when all the six leading banks go bankrupt. Since Lehman brothers is not one of the six banks, we should not suffer any loss.

4) it is greed that drive them to invest in minibond.

Many of us bought the bond during last year when the market is good, if it is greed, then we should invested in stocks, because the return is easily 20% to 30% within weeks. But instead we chose to part our money in minibond for five full years just to earn a total return of 25.5% ( 5 x 5.1%).

5) high return high risk, since you get 5.1%, the risk should be high.

Comparing 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 interest offered by the bond is not very attractive because we have to part the money for 5 years just for 5.1% interest. But the bond is issued by the six leading banks, the risk should be much lower than OCBC preference shares(six bank against one).

Thank you.

14 comments:

Parka said...

I agree totally with all the answers, especially answer no. 3.

The product is tied to 6 entities, should one fail, 1/6 of the investment goes. What wasn't mentioned was when Lehman goes, 100% of investment goes.

That, and I thought this was a bond issued by 6 companies combined into one.

Parka said...

I agree totally with all the answers, especially answer no. 3.

The product is tied to 6 entities, should one fail, 1/6 of the investment goes. What wasn't mentioned was when Lehman goes, 100% of investment goes.

That, and I thought this was a bond issued by 6 companies combined into one.

Anonymous said...

Quote

On the Financial Crisis

ST A6

" First of all, government should not be making decisions for indivduals; individuals should have the right to decide for themselves according to their circumstances, their preferences a, their needs"

PM

Anonymous said...

i agreed because that was what i understand. i consider this cheating after i found out the truth: no bonds at all, just some swap here and there that i don't know about and anybody fail, i get zero. this is the worst and most unfair deal that i don't believe anyone will buy if he/she knows beforehand.

Anonymous said...

Let me add something. The prospectus (and pricing statement) was not even given to me. Only the brochure was given at the point of sale.

Somebody will say, "why you didn't ask for prospectus?".

In the first place, would I know there is a prospectus for this product? Why didn't the RM just give me the full materials (prospectus and pricing statement) and explain clearly the product?

Anonymous said...

I agree. It is not greed. Just plain stupidity.

Anonymous said...

Sometimes it is like "a scholar talking to a soldier, you can't talk logically".
The "soldier" is not going to listen to yr logic. So whatever you say is going to fall into deaf ear.

Anonymous said...

The moral of the story is : dont trust anybody blindly, thats a high price to pay n a great lesson to learn. So in future whatever product the banks r selling "DONT BUY" regardless of "BOND" etc.. we lost our entire savings without knowing where or what goes wrong and yet there r people who brand us as "GREEDY", "STUPID", so sad.

Anonymous said...

Yes that is the investors viewpoint but I think MAS viewpoint is a bad investment so investors should bear responsibility. Sad and sigh...

Anonymous said...

Anonymous said...

Let me add something. The prospectus (and pricing statement) was not even given to me. Only the brochure was given at the point of sale.

Somebody will say, "why you didn't ask for prospectus?".

In the first place, would I know there is a prospectus for this product? Why didn't the RM just give me the full materials (prospectus and pricing statement) and explain clearly the product?

1:13 AM

Yeah now THATS a reply that would get back your hundred Ks

Sure try it by all means

of cos you need to think of your next reply for the coming up question.."if you are not familiar with what you are doing, why do you proceed to do it?"

whose fault if the rice doesnt reach your stomache?..your throat? your mouth? your spoon? your hand? your bowl? or the rice seller? or higher above?

Anonymous said...

I went for interview by FI,
He asked me whether I receive any pricing statement. I told him what is this . This is the first time I hear such term "Pricing statement "

We have not been updated with the minibond price from day one. If we have means to access the prevailing price of minibond . When it drops to certain level, we would have disposed it before it becomes zero value.

The FI is very smart , after this SAGA, now they send email to us to update the weekly price of pinnacle.

Convinced Sympathiser said...

Has anyone thought of reporting to the police?

From the various statements and comments made by the so-called "investors', who can be also called "bank customers", I can't help but concluded that you have been cheated or conned.

So why not make a police report to highlight the crime that has been committed?

What is holding you guys back?

Jack said...

The title mini bond had already mention to customers is bond products. i feel very sad that there are more than 80% of the investor is about 50 to 60 year old. MAS please do action now, this had give public out cry. No body will believe to buy any products from bank any more if this case had not be handle well .

Anonymous said...

This Minibond fiasco serves a warning for all investors that MAS is basically a shame to Singapore financial reputation. First it fell asleep on the, let Lehman and others to sell junk and misrepresented the risk and lied to investors. Now many of the risky investments failed, MAS is still hiding from its responsibility. It is outsourcing its responsibility to the same companies that brought the problems in the first place. It failed to work with Min of Finance to bail out your losses, yes, your hard earned money invested on instruments that MAS supposed to police. Because MAS is a government entity, therefore government should step up to its responsibility and inject liquidity to fix its failure. If not, local and foreign investors will pull its money to other offshores account, i.e. Hongkong, or Dubai where its government put the money where its mouth is. Fleeing of foreign investors will have great negative consequences on Singapore ability to attract capital. This is the time to show if Singapore is really a safe banking place or just over crowded tall buildings city with third world country assurance.

Blog Archive