Helping retail investors: the HK way and the S’pore way

In Investments on 01/04/2011 at 9:39 am

The speculation in the MSM that MAS’s MD had resigned  so that he could join MAS board members GCT, Tharman and Hng Kiang in the cabinet reminded me of the different ways HK and S’pore helped retail investors affected by the default of structured products connected with Lehman Brothers .

Sixteen banks in HK have recently agreed to buy back the minibonds that they sold to 31,000 (out of 43,000 investors) for up to 96.5% of their face value. Bloomberg  An estimated 4 percent of note holders would get at least 90 percent of their investments back, and 65 percent of those eligible would get 80 percent to 90 percent.

In S’pore, 1088 investors  (12.2% of minibonders) received the face value of their minibonds. So percentage-wise, the government here did better in getting the distributors to be more compassionate: to the elderly and those with only a primary six education.  But 7839 (87.8%) did not get this compensation:  6049 (67.8%) received more than 50% and 1790 (20%) received less than 50% of the face value of the minibonds: considerably less than the Hongkies.

Note that the figures given by MAS combines both compensation and the remaining value of the minibonds. The HK figures exclude those who do not receive compensation but who will still receive the remaining value of the minibonds. So the Hongkies who were compensated, got better compensation. But against that the S’poreans got paid in full last year. In HK, those being compensated were paid about 60% last year.

But taz not all. Think of the 1000 over people here who invested in DBS HN5 Notes.

DBS’ Hong Kong unit last year agreed to pay out HK$651 million or about S$115 million to some clients who bought products linked to Lehman Brothers. As HK$1.3 billion of notes were sold, the compensation received works out to 49% of amount invested.

In S’pore, it sold a similar product, HN5 Notes. DBS issued, arranged and distributed HN5. A total of S$103.7 million worth of HN5 were sold to 1,083 retail clients between 30 March and 30 April 2007, according to a July 2009 MAS report.

The same report said DBS compensated investors S$7.8 million.

What this works out to is 7.5% of amount investments versus 49% in HK.

Then there are several hundred people who bought Jubilee and Pinnacle Notes who got nothing if they failed to get their brokers to compensate them.

Why did the governments react in difference ways to identical products?  My cynical view is that the  HK government calculated that it had to strong-arm the banks into a settlement that favoured investors. The investors were prepared to inconvenience the public, breaking laws in the process, if necessary. A branch of DBS bank was vandalised. They also had the leading opposition party in HK helping them. Lawyers belonging to the party, or sympathetic to the party, helped file law suits.

In S’pore the investors were law abiding, passive and had only Tan Kin Lian and gang (self-included) to help them. The government could afford to ignore them.

Passivity has its price is the lesson investors and citizens should take away from the attitudes the governments’ took in handling similar products. But then it can be argued that being passive, avoids inconvenience and trouble.

But if that is the belief, don’t whine. Accept yr losses and keep quiet.

  1. That’s how it works… tame population and that’s what you get. Even with the current settlement, the HK investors are still complaining, and the governement here is not labeling them as “champion complainers” like senior ministers include old man himself in the PAP government is.

    DBS wouldn’t dare not to settle in HK. In Singapore, they get away with murder.

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