WHILE the forthcoming Singapore Savings Bonds' (SSB) interest rate may seem lower than those of commercial banks, the new bonds come without penalty for early withdrawal ("New govt bond offers rising rates"; last Tuesday).
Still, more can be done to encourage retail investors.
There should not be any cap on the amount people wish to invest, to underscore that it is a free market on a par with Singapore Government Securities.
Because the SSB will not be traded on the Singapore Exchange, the Monetary Authority of Singapore (MAS) could consider distributing bonus shares depending on the profit and return of the MAS' investments that use SSB monies.
If investors choose to complete the bond duration, they are also taking some risk on the global interest rate, which depends on the fluctuating US Federal Reserve's rate.
Therefore, to entice investors to complete the maturity period, the MAS could consider issuing bonus shares as an alternative for those who complete the bond period, in addition to the interest, which is what Singtel did on its initial public offering.
The bonuses are to reward investors for their loyalty and make up for interest rate fluctuations.
My second point relates to the deposit guarantees. Currently, the Government guarantees up to $50,000 on money deposited in approved banks, but the new bonds are managed by the MAS and not commercial banks, so would the same cap apply?
Will investors be allowed to use their Central Provident Fund monies to purchase the bonds?
A better way is to give investors two choices:
One is the direct Singapore Savings Bonds, which are risk-free, and the other could be to design something similar to the Singapore structured deposits, which carry higher risk and more interest - which would mean that they do not come with a government guarantee.
This would give investors more leeway to decide on their mode of investment and to compare schemes with commercial banks' products, so as to make an informed choice.
Francis Cheng
Still, more can be done to encourage retail investors.
There should not be any cap on the amount people wish to invest, to underscore that it is a free market on a par with Singapore Government Securities.
Because the SSB will not be traded on the Singapore Exchange, the Monetary Authority of Singapore (MAS) could consider distributing bonus shares depending on the profit and return of the MAS' investments that use SSB monies.
If investors choose to complete the bond duration, they are also taking some risk on the global interest rate, which depends on the fluctuating US Federal Reserve's rate.
Therefore, to entice investors to complete the maturity period, the MAS could consider issuing bonus shares as an alternative for those who complete the bond period, in addition to the interest, which is what Singtel did on its initial public offering.
The bonuses are to reward investors for their loyalty and make up for interest rate fluctuations.
My second point relates to the deposit guarantees. Currently, the Government guarantees up to $50,000 on money deposited in approved banks, but the new bonds are managed by the MAS and not commercial banks, so would the same cap apply?
Will investors be allowed to use their Central Provident Fund monies to purchase the bonds?
A better way is to give investors two choices:
One is the direct Singapore Savings Bonds, which are risk-free, and the other could be to design something similar to the Singapore structured deposits, which carry higher risk and more interest - which would mean that they do not come with a government guarantee.
This would give investors more leeway to decide on their mode of investment and to compare schemes with commercial banks' products, so as to make an informed choice.
Francis Cheng
