Hungry Ghosts Eat Greedy Souls
SOURCE : tvtropes.org
I stare, quite aghast, at at blinking screen of the EUR/USD intraday graph which is defying gravity as Spanish spreads are widening, European stocks are dropping and USD/JPY is crashing.
The pretty boys of fx have lost the plot. They are only fixated on one thing now. Taking out the stops before they go home for the day.
It is just the same as SGD corporate bonds today. The book size for the new PCRT (Perennial China Retail Trust) was in excess of SGD 750 million, when the company’s market capitalisation is only SGD 540 million comprising of far flung assets in 2nd and 3rd tier Chinese cities.
It is bordering on the bizarre of Twilight Zone and ironic that its happening in this Chinese Hungry Ghost month.
Besides the obvious message all this is sending that there is no karma in banking, another well worn lesson that never fails to impress me is that there is no limit to human greed.
Finance Ministers are allegedly commiting suicide in Japan.
Welcome to the Party !!
Hi, i was thinking that this perennial 3 year bond to be a good option for reliable income in retirement at more than 6% and a short 3 year maturity reduces interest rate spike risk. I consider stocks and property on the high side now, and short term bond provide capital preservation, and returns beating inflation. Kindly advice if there is any downside which i may have missed.
You have a point until you weigh options.
I am not qualified to give advice, given the stringency of requirements these days,
But i would suggest that if a bond is unfairly weighted on pure spreads alone, it is not ideal to weigh equity vs credit alone.
Capital preservation is an interestingly concept. What makes you think that buying an unknown credit is capital preservation ? That would make Greece and Spain look quite good in comparison.
Then again, you are very well entitled to your reason which makes you an obvious equity person.
Good luck.
Whats the difference between buying PCRT bond with those popular toshin funds that pay high dividend , but out of capital? The PSG (Pua Seck Guan) charm? Have a look at their assets and wonder their cash flow generating abilities before making a decision? Shenyang assets looks good with high speed rail connection, but not seasoned tenants (is pcrt rental income stable? ), lots of competitor malls nearby and 50pc equity interest with china partner (faith in china bankruptcy law?) Chengdu and Foshan mall? It’s a hope in future.
To qualify I have total respect and admiration for PSG for transforming the cap mall biz in spore into a lean mean machine, and remain happy owners of the shares for long time (although I pity the individual tenants a lot- ask them about the revenue-share, opening hours and renovation requirement if you are unaware)
U want 6pc yield? Dozens of companies out their paying those dividends, out of stable and sustainable cash flow.
In the world of zeros, earning 6pc means need to put in effort to find the gems from the lemons.
PCRT traded to high of 102.30 after a poor opening yesterday.
China private banking customers should be happy to lap this up.
No leverage though, means pay full cash.
Capital preservation? I supposed you are referring to the redemption on maturity (assuming they are still in the game with China cooling down the market etc). On that aspect, yes, that effectively gives you some comfort to know there is a principle amount back (assume no default) vs getting an uncertain pick up of 140bp in dividend yield if you dive into equity. Next, the practicality of owning the bonds and selling in the secondary market if you so wish to liquidate for extra cash. Your sale price is also subjected to market [dark] forces like equity. Throw in some ridiculous bid-ask spread, admin charges and [some] bankers who read your every move, what’s left? Like equity, your worst downside is 100% capital loss, so where’s the edge in capital preservation and security?
To place your hard earned money into a company with no verifiable financial statements [5.182mio finance income???] to back it up, uncompleted developments, and so far away from home, not very wise for a retirement plan.
Look inward. There are much safer and better names closer to our shores that offer slightly lesser yield but allows you a peace of mind when playing with grandkids. Let’s not repeat history but learn from them. We been through too many financial crisis to know better.
Point taken that the assets of Perennial are in china and the higher risk. How about comments on the new Swiber senior perpetual 9% with step up to 12% if not called by 3rd year? Understand that perpetual has interest rate spike risk, however noted the spike was to 7.8% during asian financial crisis, and perhaps at 12% give some safety margin?
Swiber is cool structure to beat the other 2 prior superior names no ? It is a SENIOR Perp !! Voila !
Perpetuals are interesting… I find, from experience, that their price action is influenced both by rates and by equities which makes them a hybrid security of sorts.
Cant comment on whether it is fairly priced or I will be sued.
indeed corporate perps are interesting. it can be viewed as WACC optimisation IF the company has robust financials. For the offshore ones, i guess the equity shareholders will vote with their price actions in the longer term (6-12 months- they need to see cashflow/retained earnings post perp coupons). I.e. small companies operating in a volatile earnings industry, are they happy that one more guy stands in front of them to strip them of earnings, or do they think these bondholders provide them with cheap funding (higher operating leverage) for them to enjoy the (if any) future boom.
In short. if you think you need to own those risk, go for the equity.
P.S. NO vested interest (and not intending to) in any of those
Guys,
I came across this thread today and personally I am heavily vested in PCRT but decided to pass on the bond last month.
I spend most of my time traveling between China and Singapore and being a typical “kiasu” Singaporean, I visited all the malls that is under PCRT.
My personal opinions so please take it with a pinch of salt :
1) The malls are real and in good shape but the crowd is not there due to many reasons, too many to list it down
2) Everyone believed in the high speed railway plus shopping mall concept. But it has yet to take off as the high price of the tickets are still putting people off
3) Tier 2 and 3 cities will eventually take off but how long, god knows?
4) Nobody knows what will happen to china in the next 3 years, seriously, so if you believed in the china growth story – go for it. But I strongly advise not to bet your last dollars on it especially retirement funds. There is a saying in China ” Nothing is real, it’s only as real as it gets “
This is a great comment.
Your observations speak the truth that most people choose to ignore.