Temasek’ 1st or 2nd retail bonds?



Is it Temasek’s first or second retail bond?

I refer to the article “Temasek offering first retail bonds at 2.7% fixed interest” (Straits Times, Oct 17).

It states that “Investment company Temasek has launched its first public bond offer for retail investors.”

Someone asked me what is the difference between the subject Temasek’s first public bond for retail investors and Temasek’s first retail private equity bond that was launched in June? (“Investors can consider Temasek’s first retail private equity bond to help supplement retirement income: Ho Ching”, Straits Times, June 4)

Well, in the first place – it is arguable whether the first retail bond should be called the first when 4 months earlier – the first retail private equity bond was launched.

Would most ‘mom and pop’ investors who are being encouraged to invest as little as $1,000 from their CPF or cash know the difference?

As to “It comes with a five-year maturity and a fixed interest rate of 2.7 per cent. Temasek is offering up to $200 million of bonds to retail investors, with $200 million on placement for institutional, accredited and other investors” – this one is at 2.7%, whereas the earlier one was 4.35%.

With regard to “The T2023-S$ bond is issued under Temasek’s $5 billion Gua-ranteed Medium Term Note Programme. The offer could be increased to $500 million if the public or placement offer is oversubscribed” – this one is guaranteed by Temasek, whereas the other one is not, although it was issued by a Temasek subsidiary.

In respect of “Temasek chief financial officer Leong Wai Leng said: “We are pleased to offer Temasek bonds to retail investors for the first time” – arguably, its not the first time – the difference being ‘Temasek retail bonds’ and ‘Temasek retail private equity bonds’.

In fact, this statement “This helps Temasek to broaden its stakeholder base and provide Singapore retail investors the opportunity to participate in another retail product” – seems to imply that its not the first time – otherwise why say “in another retail product”?

As to “”(The bonds) also increase our funding flexibility.”

Sources expect the offer to be strongly subscribed. At 2.7 per cent, the bond’s interest rate is about 38 basis points over the five-year Singapore government bond, which is trading at about 2.32 per cent.

The bond is eligible for inclusion under the CPF Investment Scheme – Ordinary Account. Members can use up to 35 per cent of their investible CPF savings to apply for the bonds under the public offer or to buy later on the market.

CPF savings cannot be used to apply for bonds under the placement. SRS (Supplementary Retirement Scheme) funds also cannot be used” – isn’t it arguably, bad enough that our CPF Ordinary Account’s interest rate of 2.5% is the lowest real rate of return of all national pension funds in the world, since 1999 – and now ordinary ‘mom and pop’ are encouraged to invest to get just 0.2% more (2.7 – 2.5)?

Leong Sze Hian

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.