Of course can't compare different asset classes.
For me fixed income is a CON job based on text book theory. Fixed income ranks ahead of risk taking equity class.
However, based on modern day business models, once a business runs in trouble, hardly anyone except secured creditors get their money back.
For that reason, I would go for equity on a calculated risks basis.
On the current rate cycle, I think many Singapore based investors may not have experience of rising rates for a long time and hence better stay clear of fixed income.
On the above, this is a personal opinion and certainly not to be taken as an advice or inducement for trade or asset allocation.
GG
(13-05-2015, 04:54 PM)piggo Wrote: [ -> ] (13-05-2015, 10:41 AM)greengiraffe Wrote: [ -> ]Historical div yield of 4.68% @ 1.84 for the parent shares vs 3.65% for a 7 year bond at a global rate cycle that appears to be bottoming out... what is your call?
Vested
GG
Cannot compare equities and bonds in that manner, since one is way more volatile (earnings? payout ratio? etc.) that the other other than of course the obligation to pay the fixed rate.
[Image: TYz7uyy.png]
The bond issue does seem quite decent compared to the others in the market. I'd think CMA's yield is not reflective and on the high side since most people would expect them to redeem the bonds before 2017. I'd bet my 2 cents that they'll need to upsize it to 500m.
(13-05-2015, 06:02 PM)greengiraffe Wrote: [ -> ]On the current rate cycle, I think many Singapore based investors may not have experience of rising rates for a long time and hence better stay clear of fixed income.
On the above, this is a personal opinion and certainly not to be taken as an advice or inducement for trade or asset allocation.
GG
Like our Chinese counterparts, Singaporean depositors have gotten the lowest interests rates for a long time now. From previous bond offerings, so it's obvious that the demand is there. 3.65% is also a respectable interest rate for the generic depositor since banks will take some time (if ever) to match this rate... And when they do, odds are the gains from earlier years would more than offset the loss.
So I'd think that the bond will quickly rise above par at least in the short term, which would translate to profits if liquidity is needed. If not, holding it to maturity still beats putting money in the bank. Win-win case for the retailers and for Frasers I'd say. But think we are off topic, since it's just business as usual for the company...
(13-05-2015, 06:17 PM)piggo Wrote: [ -> ] (13-05-2015, 06:02 PM)greengiraffe Wrote: [ -> ]On the current rate cycle, I think many Singapore based investors may not have experience of rising rates for a long time and hence better stay clear of fixed income.
On the above, this is a personal opinion and certainly not to be taken as an advice or inducement for trade or asset allocation.
GG
Like our Chinese counterparts, Singaporean depositors have gotten the lowest interests rates for a long time now. From previous bond offerings, so it's obvious that the demand is there. 3.65% is also a respectable interest rate for the generic depositor since banks will take some time (if ever) to match this rate... And when they do, odds are the gains from earlier years would more than offset the loss.
So I'd think that the bond will quickly rise above par at least in the short term, which would translate to profits if liquidity is needed. If not, holding it to maturity still beats putting money in the bank. Win-win case for the retailers and for Frasers I'd say. But think we are off topic, since it's just business as usual for the company...
U forgotten about DBS - the arranger of that facilities that earn relatively risk free fee income
(13-05-2015, 06:02 PM)greengiraffe Wrote: [ -> ]Of course can't compare different asset classes.
For me fixed income is a CON job based on text book theory. Fixed income ranks ahead of risk taking equity class.
However, based on modern day business models, once a business runs in trouble, hardly anyone except secured creditors get their money back.
For that reason, I would go for equity on a calculated risks basis.
On the current rate cycle, I think many Singapore based investors may not have experience of rising rates for a long time and hence better stay clear of fixed income.
On the above, this is a personal opinion and certainly not to be taken as an advice or inducement for trade or asset allocation.
GG
(13-05-2015, 04:54 PM)piggo Wrote: [ -> ] (13-05-2015, 10:41 AM)greengiraffe Wrote: [ -> ]Historical div yield of 4.68% @ 1.84 for the parent shares vs 3.65% for a 7 year bond at a global rate cycle that appears to be bottoming out... what is your call?
Vested
GG
Cannot compare equities and bonds in that manner, since one is way more volatile (earnings? payout ratio? etc.) that the other other than of course the obligation to pay the fixed rate.
[Image: TYz7uyy.png]
The bond issue does seem quite decent compared to the others in the market. I'd think CMA's yield is not reflective and on the high side since most people would expect them to redeem the bonds before 2017. I'd bet my 2 cents that they'll need to upsize it to 500m.
LOL you trying to say that equity is safer than bonds????
(13-05-2015, 06:58 PM)greengiraffe Wrote: [ -> ]U forgotten about DBS - the arranger of that facilities that earn relatively risk free fee income
Haha... banks have been earning risk free income for literally thousands of years. Banking and finance is the way to go these days, even the shoe polishers in banks/funds earns more than any other respectable profession.
(13-05-2015, 06:02 PM)greengiraffe Wrote: [ -> ]Of course can't compare different asset classes.
For me fixed income is a CON job based on text book theory. Fixed income ranks ahead of risk taking equity class.
However, based on modern day business models, once a business runs in trouble, hardly anyone except secured creditors get their money back.
For that reason, I would go for equity on a calculated risks basis.
On the current rate cycle, I think many Singapore based investors may not have experience of rising rates for a long time and hence better stay clear of fixed income.
On the above, this is a personal opinion and certainly not to be taken as an advice or inducement for trade or asset allocation.
GG
There is one important characteristic bond has over its mother share - low beta. I can imagine that one day when I shrink, I will be very pessimistic and thus low beta instruments will be more appealing to me.
This stock is so funny! Literally, I mean STI! Good profit but so what! The rise is just so minimal! Seriously, the once mighty STI has long faded into oblivion!
Not vested
GG. If everyone feels the same way you do on Fixed income, we will not have a FI industry.
In a bond... investors are assured that they will be paid back the principal amt (barring bankruptcy) with pinpoint & predictable interest income annually.
As for equity, no investor is sure what the sh price will be nx month or nx year, let alone 7 yrs in this case. No investor can also be sure what the dividend payout will be in the nx 7 years.
** All the above is on the assumption that bond holders will hold to maturity.
Thanks everyone for pointing out text book theory.
I understand what u guys are pointing out. Unfortunately we are living in extraordinary times and hence at this point where there is abundance of liquidity due to Central Bank interventions, even bonds are deemed risky largely due to pricing.
Hence the perception of being principal guarantee is flawed. Since its risk taking, I would rather assume calculated risks.
3+% for 7 yr to me is deemed too risky. For users of OPM, such rates will be highly affordable as returns on embarking on projects will definitely be much higher than such levels.
GG
(18-05-2015, 10:13 AM)morten Wrote: [ -> ]GG. If everyone feels the same way you do on Fixed income, we will not have a FI industry.
In a bond... investors are assured that they will be paid back the principal amt (barring bankruptcy) with pinpoint & predictable interest income annually.
As for equity, no investor is sure what the sh price will be nx month or nx year, let alone 7 yrs in this case. No investor can also be sure what the dividend payout will be in the nx 7 years.
** All the above is on the assumption that bond holders will hold to maturity.