Investors reminded to do homework before buying high-yield bonds

Singapore

THE strong demand from Singapore retail investors for high-yield instruments has raised concerns about whether they should be rated and how risky those instruments actually are. Recent news of defaults in the Singapore bond market have not helped, some note. Others, however, stress that bonds are traditionally considered less risky than equities and that investors ought to do their homework before investing as they would with any other instrument.

"We recommend our clients to focus on high quality issuers and where the issue size would not hinder secondary trading," said Neel Gopalakrishnan, director and emerging markets bond analyst at Credit Suisse Private Banking Asia Pacific.

"For weaker issuers and smaller-sized issues, there is not enough liquidity in the secondary market, making it difficult for investors to exit if there were to be any negative credit news. We also prefer issuers with strong shareholders, since such companies could benefit from financial support from the shareholders in case of any credit is…