Monday, July 30, 2012

Private banks bite into bonds pie


Straits Times: Mon, Jul 30

PRIVATE banks are starting to feature more strongly in the demand for recent preference share and bond issuances.

Experts believe that with the prolonged economic uncertainty, many more investors are turning to bonds or similar investment instruments to achieve a better yield than bank deposits, and also to escape the volatility in the stock market.

For instance, just two weeks ago, Mapletree Treasury Services, which is wholly owned by Temasek Holdings, issued $600 million worth of perpetual securities, with private banks snapping up 70 per cent of the issue.

For Olam's $275 million perpetual bond offering, private banks accounted for close to 80 per cent of the book.

Also, Australian real estate management group Lend Lease saw 43 per cent of its $275 million worth of bonds bought by private banks.

Mr Keith Magnus, chairman and head of UBS Investment Banking, Singapore and Malaysia, said: 'We are seeing an increasing trend where issuers of new initial public offerings are looking to increase the amount placed with cornerstone and anchor investors.

'We have also seen strong demand from wealth management clients for high-quality debt and equity deals, who are capitalising on the choppy markets to get solid allocations on deals they like.'

DBS Bank's head of fixed income Clifford Lee noted that issuers are benefiting from this wave of demand from private banks.

'Having a greater demand from wealth managers and private banks diversifies the investor base, and can increase the price tension for bond offerings.'

More than two-fifths of OCBC Bank's latest $1 billion issue of preference shares and United Overseas Bank's $1.2 billion subordinated debt were bought by private banks.

Mr Charlie Chan, founder and chief investment officer of Charlie Chan Capital Partners, is a cornerstone investor of the Ascendas Hospitality Trust, whose initial public offering closed last week.

He said: 'The number of investors is growing. I think there could be many more. Singapore has a stable, appreciating currency, which is a very attractive quality for foreign investors as well, who won't have to worry about foreign exchange losses.'

As investors put their money in these relatively newfangled investment structures, corporates too, have reason to cheer as it means another source of capital.

DBS' Mr Lee added that while in Europe and the United States, the private bank investors for bonds have been common for a long time, in Asia, it is just the beginning.

'This interest in bonds is definitely sustainable. It is not meant to be a replacement for equity or property investments. It is an added diversification, a much-needed diversification,' he said.

songyuan@sph.com.sg

IT'S JUST THE BEGINNING

This interest in bonds is definitely sustainable. It is not meant to be a replacement for equity or property investments. It is an added diversification, a much-needed diversification.

  
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