SSBs' take-up not seen to be at stocks' expense

Singapore

THE first issue of Singapore Savings Bonds (SSBs) has sucked up a substantial amount of funds from retail investors, but market watchers do not think that will add to the local stock market's pile of woes.

The Monetary Authority of Singapore (MAS) accepted slightly over S$413.16 million in SSB applications from 19,505 individuals, it said in a statement on Monday. That works out to roughly S$21,180 per person on average. The central bank said all applicants would receive their application amounts in full, subject to the limit of S$50,000 per person.

The amount taken up in the September issue was much less than the earlier-declared S$1.2 billion issue size, but an MAS spokesman said in an e-mailed statement that the S$1.2 billion figure "is a limit and not a target".

"MAS set a high issuance size of S$2 billion to S$4 billion for the three issuances in 2015 to meet demand from first-time applicants," the spokesman added. "As this is the first issuance, there are potential Savings Bond investors who are still learning about the product or considering whether this is something useful to them."

Industry watchers said that the amount of funds that went into the September round of SSBs would likely otherwise have gone into bank deposits, rather than into stocks or property.

Christopher Tan, chief executive of fee-based financial advisory firm Providend, said that serious investors would likely know that "they can't just depend on SSBs, the returns aren't enough". He said: "The money going in is very likely just cash money that people intend to put in a bank anyway."

He added that since there's no withdrawal penalty, if interest rates go up in future, some investors in this tranche may redeem their SSBs and roll over the sum into the next one.

CIMB Private Bank economist Song Seng Wun said the solid take-up demonstrated the attractiveness of the risk-free rate offered by SSBs. "In the current low interest rate environment ... it sells itself."

He added that if the equity markets' showing had been better, some of the money might have gone there instead.

"If anyone smells a deal (in stocks), they would have gone there rather than SSBs ... there's been a dry spell for the equity market with plenty of turbulence."

The September SSBs will be deposited into applicants' Central Depository (CDP) securities accounts on Oct 1, the MAS said, adding that successful applicants will get a letter from the CDP within three to five business days informing them of the amount of SSBs they have received. The next issue will be announced on Oct 1 and issued on Nov 2.