Perpetual bonds a hit despite rotation fears

THE busiest start to a year on record for Singapore perpetual bonds is belying forecasts that clients of private banks are ready to switch into equities.

Private banks snapped up at least 80 per cent of the S$500 million raised by Trafigura Beheer BV, the world's second-largest metals trader, and Hyflux Ltd, Singapore's biggest provider of water-treatment services, when those companies sold bonds without a fixed maturity, people familiar with the matters said. Just 11 per cent of Suntec Real Estate Investment Trust's S$200 million of six-year notes went to high net worth individuals, another person said.

Perpetual note sales of S$500 million this year-to- date compare with zero for the same period in every year going back to 1999, according to data compiled by Bloomberg. The "great rotation" by investors from bonds into equities has yet to occur, UBS AG, the biggest private bank in Asia, said in a report this month. Perpetuals are popular with rich people in Singapore, Asia's largest private banking centre with offshore assets of about US$800 billion, because the higher coupons they offer match those investors' greater appetite for risk.