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Posts Tagged ‘high-yield’

Robin Hoods? Our private bankers/Why ministers may need a pay rise after GE?

In Banks, Energy on 11/05/2015 at 1:24 pm

They make rich S’porean clients poorer, taking from the rich to give to their even richer employers? They are really the “Princes of Thieves”, better than “Robin Hood “Prince of Thieves”.

Remember these bond deals pay good commissions to the private banks (and their private bankers): they get fees from their clients (for giving them access to these now toxic products), and the issuing companies (for stuffing their mullets with junk).

Go KPKB to CASE, CAD and the central bank. Hehehe. Wonder if millionaire ministers kannsa burnt? They’ll need a pay increase.

Remember DBS’ Indian FT blowing up its Treasured clients with credit notes? This could be alot worse for the private clients.

Singapore’s richest investors are hoping that “never” means about three years in the bond market.

Holders of perpetual notes with no set maturity face the island’s first redemption options in September, when three companies including oil services firms Ezra Holdings Ltd. and Swiber Holdings Ltd. can choose to repay securities sold in 2012. While Ezra says it plans to pay off the notes and refinance, their yield has surged more than 200 basis points over the last year to 14.2 percent, suggesting it may be costlier to replace them. Swiber faces the same test after saying it plans to redeem its bonds, which have added more than 230 basis points.

Private banks have snapped up the bulk of Singapore’s S$9.5 billion ($7.1 billion) of corporate perpetuals on behalf of wealthy clients, reckoning the companies would repay the notes at their soonest chance rather than incur higher interest rates when a so-called step-up coupon takes effect. While that would offer some compensation if the debt stays alive, any mishaps could shake faith in securities that have funded about 15 percent of the island’s corporate debt over the last four years.

If any issuers choose not to pay in September, “there would be some discomfort among investors when they realize that what they’ve been holding is not necessarily going to be paid off at the time they expected,” said Vishal Goenka, the Singapore-based head of local currency credit trading at Deutsche Bank AG. “There is nothing right or wrong, issuers have already told them from the beginning the option was there, but there would be some confusion.”
And
Demand for higher returns in Singapore bonds from the city’s swelling private banking industry has brought with it greater risks.

Three out of every 10 notes sold last year are yielding more than 6 percent. Halcyon Agri Corp. went to debtholders last month asking them to waive interest cover requirements before it’s even had to stump up a coupon payment. Bloomberg’s default model shows that VTB Capital SA has an almost 50 percent chance of reneging on its debt.

“The recent swings have been a good wake-up call,” said Vishal Goenka, the Singapore-based head of local currency trading in Asia for Deutsche Bank AG. “Investors need to analyze the credit quality of issuers more thoroughly.”

Junk-rated companies in Singapore must find funds to repay $2.1 billion of debt this year, up from $1.7 billion in 2014 and $1.1 billion in 2013, according to data compiled by Bloomberg. That accounts for 35 percent of all bonds maturing in Singapore in 2015. Wealthy clients of the island’s private banks snapped up 86 percent of the highest-yielding http://www.bloomberg.com/news/articles/2015-01-05/singapore-alert-to-risks-as-cracks-emerge-for-junk-asean-credit
And then there is the probability of a rise in US rates in September.

Reits and other high yielders fit narrative for the “New Neutral”

In Financial competency, Property, Reits on 17/11/2014 at 1:58 pm

BOND KING’S MANTRA LIVES ON William H. Gross may have departed Pimco, but executives at the bond giant have embraced his view that a stagnating global economy will force central banks to keep interest rates low, Landon Thomas Jr. writes in DealBook. …

Before he left the firm, Mr. Gross called his insight the “new neutral,” and Pimco is showing no signs of abandoning its departed leader’s mantra. In so doing, the firm’s executives are making the case that the Pimco bond funds that have made investments based on this economic approach will not soon change their strategy. Daniel Ivascyn, who was appointed to succeed Mr. Gross as group chief investment officer, took pains to point out that this new investment tack had many fathers, and emerged from a Pimco-wide brainstorming session this spring. But it is also true that the notion never really took off until Mr. Gross pitched it at an investor conference while wearing sunglasses, Mr. Thomas writes.

Mr. Gross’s economic predictions have failed in the past, but Pimco looks to be on firmer ground this time around. Like Mr. Gross, a number of economists believe that a mix of high debt, low growth and disinflation will force central banks around the world to keep rates from rising. Before he left Pimco, Mr. Gross had begun to invest in riskier, higher-yielding securities like government bonds in Italy and Spain and corporate bonds in Brazil, a strategy that the firm is still following. …

NYT’s Dealbook

Well the equivalent of these in equities would be Reits and other high yielders. Interestingly, FT reports that the fund mgr of Schroders flagship UK fund thinks there is value in income producing equities.

And an alternative view: We are doomed, doomed. Central banks cannot prevent deflation of everything including assets.

 http://blogs.reuters.com/breakingviews/2014/10/06/asset-price-disinflation-may-be-next-big-thing/

High-yield, low pay-out stocks are best

In Uncategorized on 10/11/2010 at 5:40 am

[Update– read the first comment. Credit Suisse could be wrong]

In Singapore, investing in high-yield, low-payout stocks was the best-performing strategy over a period of 15 years says Credit Suisse. “Outperformers” are telco M1; rig builders Keppel Corp and Sembcorp Marine; transport group ComfortDelGro Corp; property developer Allgreen Properties; and conglomerate Sembcorp Industries.

These stocks have dividend yields of up to 6.3% (as of end October) a year and only pay out as little as one-third of their profits as dividends.

Other high-yield, low-payout stocks it mentions are Fortune Reit; and property companies MCL Land and United Engineers. These have dividend yields of over 3% a year but pay out less than a quarter of their earnings as dividends.

Why?

— “High-yield, low-payout essentially means you are buying yield stocks that are trading at a low price-earnings ratio’, or value stocks”. This strategy tends to outperform others in rising markets except in the bubble phase.

— A “low payout implies that these companies are retaining cash for growth which also helps long-term performance”. I never tot of this. Silly me.

— If things go wrong, the dividend yields could be sustained if part of the retained earnings were put into reserves (bit like S’pore’s reserves). This is my tot, not Credit Suisse’s.

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