The monetary authorities of Singapore and Hong Kong were foolish to approve the toxic products to be sold by financial institution and security firms to retail investor. They both wanted to compete to be financial centre, so they approve these products blindly.
When Australia approved these products to be sold, they insisted that the investment bank list out the names of the underlying securities. If people don't recognized these companies, they will not buy.
ST
4 comments:
Most investors who bought those structured products did not read the prospectus or the RM did not bring it to their attention, the derivatives embedded in the product. Even if they had read the prospectus they did not understand the structure of the product. Therefore, they are not aware that the investment fund is used as a base for the insurance of so called 100 to 150 companies. If they are aware of this, nobody will buy the product.
Here the small investor is being mislead to become an insurer to 100to 150 companies and sub-prime mortgages in the USA and Europe through the credit default scheme. Even AIG, the world biggest insurer falls victim to this CDS and has to be bailed out by the USA Govt, when it start to insure the sub-prime mortgage, etc, etc put up mainly by the investment banks, who also incidentally created the structured products sold here. If AIG call fail, what about the small investors here who purchase those products over the counter from the FIs.
Actually a lot of people, especially the older folks, think that when they buy these toxic products, they are still dealing with the local banks that sold them. They even believe that these banks won't collapse (that's right), if not even FDs will also be gone. They thought it was just like FDs with higher returns and the worst is zero returns but with principal guaranteed!
That's where the root of the problem arise.
Had they knew it was Lehman Brother, Merrill Lynch or what not foreign "unknown"s to them that will pose the risk, they definitely would not have bought it.
These structured products are not sold in Malaysia, Indonesia, Thailand, etc. So we score another first by allowing foreign investment firms to sell CLN to Singaporeans in a not transparent manner and thereby causing a lot of grief to the investors. Furthermore no action is taken against these firms who are still doing business here..
Investors who bought these credit linked products like Pinnacle Notes at the time are told of the 5or 6 Reference Entities which are strong financial entities or Countries. Now the entities that are defaulting are foreign companies in Iceland or US that are unheard of which the issuer, Morgan Stanley, have invested and now going bust. This is not different from cheating but hiding behind protection of legal terms.
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