Tan Kin Lian's Blog: OCBC Preference Shares

Tuesday, June 03, 2008

OCBC Preference Shares

Dear Mr. Tan,
OCBC is offering preference shares to retail and institutional investors. If I am not wrong, DBS too offered such investment earlier. I like to know whether would you consider buying into this and how much?

REPLY
Personally, I intend to invest in the OCBC Preference Shares. It gives a good dividend and has rather low risk.

11 comments:

Weng Mao Fa said...: 1. Is the par value=1 cents selling at $100?
2. Can bank stop 5.1% payout?
3. Bank has to generate S$51000 for every million deposit for long long time. What business is that?

Can anyone help me to answer my doubt?. Thanks.; June 04, 2008 2:03 PM
nhyone said...: I have two questions.

1. There seems to be a pent-up demand for high interest and low risk investment. It seems to me that there is a lot of liquidity out there. Where is the money coming from?

2. OCBC has already issued 3 NCPS and now this is the fourth one. The information is available on OCBC's website.

Although they boasted that they have never missed paying dividends since end of WW2, I wonder why does OCBC choose to use NCPS rather than other methods to raise the money.; June 04, 2008 8:03 PM
KYH said...: Can only answer Mao's 1 & 2 questions.

Par value is $100 selling for $100. So if OCBC redeems, which cannot be earlier than 5 years, you get back $100.

5.1% can be stopped, but only if they don't pay normal dividends as well.

If OCBC stops paying dividends, the market will not take it lightly. It means that OCBC may be going under.

Preference Shares carry some risks, but I think minimal.

Good for investors who are happy with 5.1% p.a. yields, even if interest rates go up in future.; June 04, 2008 10:25 PM
Weng Mao Fa said...: Thanks to kyh.

Philip Investor Note on 4 Jun reported: "Oversea-Chinese Banking Corp. (OCBC SP): Singapore's No. 3 bank by assets said investors applied for three times the available stock in its placement offer of preference shares.
Oversea-Chinese declined 8 cents, or 0.9 percent, to S$8.59".

Why?; June 05, 2008 9:28 AM
Weng Mao Fa said...: Ordinary Share=$8+
Preference Share=$100

Why so much difference of the price?; June 05, 2008 9:34 AM
anon said...: I wonder how long will OCBC take to inform the unsuccessful applicants of the preference share offer and return them the $20,0000 +.; June 05, 2008 2:30 PM
KYH said...: Hi Mao

I think there is very little linkage between Preference Shares and Ordinary Shares. Preference Shares are more like Government bonds which are also usually issued in $100 units.

It is true that on 3 Jun, OCBC dropped 0.9%, but so did DBS (1.3%) and UOB (1.1%). STI also dropped by 1.1%. Guess it was just a bearish day.; June 05, 2008 7:30 PM
Weng Mao Fa said...: Hi,
Inflation Rate=5%+
2009 GDP (USA)=1.1%
2009-10 GDP (S'pore)=?
OCBC Indonesia Profit=?

What is the value of OCBC NCPS heading to?

Thanks.; June 05, 2008 10:45 PM
Weng Mao Fa said...: "The exit for nvestors, ........., will be to sell the shares in the market. The problem with this is, the instrument is very illiquid."

(Source:http://www.businesstimes.com.sg/sub/money/story/0,4574,282572,00.html?); June 07, 2008 7:45 PM
Unknown said...: The shares is not really that ill liquid. just sell it at bid price. Even with the loss of the spread, you still get 5% returns.; August 13, 2008 10:02 AM
Anonymous said...: Hi,

To Mr Tan, wish to seek your advise with regards to the recent OCBC & UOB preference shares. The price of preference shares are dropping a lot and it seems to be affected by the dropping of the banks ordinary share prices. Why is that so? Do you think we need to cut lost? Will the price of preference share go up in future?

Thought that the price of preference share will only affected by interest and ratings.; October 26, 2008 10:14 PM