Friday, August 24, 2012

Corporate bonds in Singapore are in demand

Singapore dollar corporate bonds issued by companies in Singapore are providing a safer investment alternative for investors amid the uncertain and volatile stock market environment. And recently, record number of them are issued and demanded by both local and international investors. According to DBS Bank data, investors have bought $22.7 billion of bonds issued by major firms year to date. The numbers will probably end higher than the previous record year, 2010, which saw $24.68 billion.

Corporate bond is a bond not surprisingly issued by a corporation. Unlike common stokes, corporate bond carries no claim to ownership and pays no dividends. Corporate bond holders have payments priority over stockholders. These debt instruments provide a fixed cashflow catch with these bonds is that a corporate bond is a safer investment than common stock in the same company.

This year the biggest issuers of corporate bond were Genting Singapore, DBS Bank, Housing Development Board (HDB), United Overseas Bank (UOB), OCBC Bank, NTUC Income and Mapletree Treasury. Genting Singapore issued $1.8 billion and then $500 million of perpetual bonds with coupon rate of 5.125% , DBS Bank issued $1 billion 10 years bond with 3.3% and then another $1 billion of 11 years bond with 3.1%.

The popularity of perpetual bonds are unprecedented. According to Reuters more perpetual bonds were sold in Singapore in the first three months of 2012 than in the previous decade and a half! This popularity, especially the interest of retail buyers, has caught the attention of The Monetary Authority of Singapore.

Singapore based banks and companies are not the only ones issuing perpetual bond here. According to The Straits Times, Industrial Development Bank of India has recently sold $250 million of bonds which saw $3 billion subscription.

AAA rating of Singapore is one of the reasons these corporate bonds are consistently oversubscribed. And according to experts, demand for Singapore dollar corporate bonds will increase as more foreign issuers will come to Singapore.

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