Bonds In Conversation – An Opinion is not Libel and it is not Contagious !

I am getting worried about writing this column in this Libel society of ours. And I am not talking about the SMU human rights school closure last month.

Just because our leaders and former leaders are libel suit champions, now Temasek linked companies are following suit.

So this is all I would venture on the matter of O (not mentioning names because of libel worry).

Now that I am back and refreshed from my break, thrust back into the game of charades, I want to firstly, comminserate with every retail investor out there who bought into the Olam new issues this year, especially the 70 odd million bought of the last tranche of SGD 100 mio on the 31 Oct.

Olam is one of the top 5 issuers this year in Singapore (SGD 1.375 million and USD 500 million) and their retail impact is huge as most of the issues were mostly retail subscribed so we can be sure that there are a lot of worried people out there cursing their luck as accredited investors (because now you know what it means and what it is like to be rich).

[ The top 5 issuers in Singapore this year in SGD are, 1. HDB SGD 4.18 bio 2. Genting SGD 2.3 bio, 3. DBS SGD 2 bio, 4. Keppel Group (including Keppel land and Keppel T&T) SGD 1.45 bio and, …. 5. Olam SGD 1.375 bio.]

Why couldn’t they have bought any of the following names below and happily enjoy Christmas ?

Issuer Name Coupon Maturity LAST PX
NTUC INCOME INSURANCE 3.65 8/23/2027 103.33
BANK OF EAST ASIA LTD 4.25 9/13/2022 103
LMIRT CAPITAL PTE LTD 5.875 7/6/2017 104.25
GOODPACK LIMITED 4.7 6/19/2017 102.87
BANYAN TREE HOLDINGS LTD 6.25 5/30/2017 103.91
BANK OF EAST ASIA LTD 4.25 9/13/2022 103
MAPLETREE LOGISTICS TRUS 5.375 Perpetual 103.99
SINGAPORE POST LIMITED 4.25 Perpetual 102.96
CENTRAL CHINA REAL ESTAT 10.75 4/18/2016 107.55
GLL IHT PTE LTD 4.875 3/11/2016 102.92
GLL IHT PTE LTD 5 2/23/2017 102.98
OVERSEAS UNION ENTER LTD 4.95 2/1/2017 103.95
LEND LEASE FIN INTL LTD 4.625 7/24/2017 103.5
GLL IHT PTE LTD 5 2/23/2017 102.98
DAH SING BANK LTD 4.875 2/9/2022 103.5
GLOBAL LOGISTIC PROPERTI 5.5 Perpetual 103.625
UNITED ENGINEERS LIMITED 4.2 1/26/2017 104.11

Then again, thank heavens we are not not holding Bankia bonds, which will be facing haircuts of between 14 to 46% as part of their bailout deal.

Second, let us examine the contagion effects of the fall in Olam bonds on the other issues out there.

Given that this is a case of “libel”, the contagion should not be expected to be too great and also, that Olam bonds were mostly not given to leverage by banks because they are unrated, the impact of portfolio margin calls are relatively more benign.

That about 10% of the SGD 1.375 bio has been wiped out, losses of over SGD 137 mio is sitting in the street and mostly, in the pockets of the retail folk, I suspect there is a desperate rush by the banks to stem the price falls and cause a street panic which is the reason why I observed several pricing anomalies in the past 2 days. Keeping prices higher gives hope to the investors and confidence as well. If anyone has not sold last week when prices were still in their 90’s, they are unlikely to sell now. It is the human psyche.

I also note some strange price changes in the other bonds which I WILL NOT SPECULATE is due to banks massaging their own books to reduce their overall losses because of the Olam that they already hold.

Just take a look at the table below ( and I take no responsibility for the accuracy of the prices).


Note that the HDB 2022 has jumped over a dollar while the HDB 2015 has fallen 70 cts. It doesn’t say actually, from a laymen point of view, and I will leave it at that or fear ….LIBEL !!!!

Third and lastly, I would like to know if anyone has tried to sell anything and been heavily discouraged by their bankers (or phone calls not returned…. ) with a variety of excuses. Because if you ask me, I do not think there is a lot ability to absorb anymore papers from the market.

If Olam is sooooo solvent, they can just do the buy back ala Greece style at 85.00 and happily pocket the SGD 206 million donation from the public and other investors. That would be recognised as a profit for 2012 financial year. Because if they continue to “burn” their cash by buying back stock to save those stock options ( I DO NOT KNOW WHO IS HOLDING MOST OF THEIR STOCK OPTIONS) and their market cap, then I say, HAVE A GOOD DAY !

Qualifier : Please note that is just a humourous post and not intended to be taken in any way seriously by anyone, or meant to mislead or confuse the reader who may chance upon this blog entry that is not publicly advertised.

Also note that I am a proponent of a white knight theory and that a saviour would emerge to inject capital for a happy ending.