More foreign issuers target Singapore-dollar market amid volatility

//Article dated 20th November 2018//

BANKERS here are hopeful that more foreign issuers will be making a beeline for the local debt market, in light of some major deals recently…

Gist:

  • foreign issuers are finding the Singapore dollar (SGD) market efficient and stable, relative to the bigger – but more volatile – US/Euro dollar markets.
  • In the year to date, there have been 27 deals by foreign issuers worth S$3.4 billion, accounting for 15.7 per cent of total volume. Last year, foreign issuers sold 34 bonds worth S$7.3 billion, or 29.5 per cent of total volume.

 

Last week, Swiss banking giant UBS sold S$700 million Tier 1 perpetuals at an interest rate of 5.875 per cent, attracting orders of more than S$1.6 billion. Two weeks before that, Hong Kong’s Shangri-La Hotel issued an S$825 million, seven-year bond at 4.5 per cent.

//Perpetual bond – Bonds with no maturity. Non redeemable, but can obtain fixed interest payments forever.

Formula for the Present Value of a Perpetual Bond

Present value = D / r, where D = coupon payment, r = interest rate
Read more: Perpetual Bond https://www.investopedia.com/terms/p/perpetualbond.asp#ixzz5Y9yPWqoS
//

Both UBS and Shangri-La were making their SGD debuts, seizing on the strong SGD liquidity amid overall volatility.

 

“SGD is one of very few Asian markets which can provide issuers with access to an alternative (that is, non USD) capital pool for Tier 1 and Tier 2. It offers a genuine alternative for high-grade western financial institutions,” said Mr Bagri.

 

//What Is the Difference between Tier 1 Capital and Tier 2 Capital?

Tier 1 capital is a bank’s core capital, whereas tier 2 capital is a bank’s supplementary capital. A bank’s total capital is calculated by adding its tier 1 and tier 2 capital together

Tier 1 capital consists of shareholders’ equity and retained earnings.

Tier 2 capital includes revaluation reserves, hybrid capital instruments and subordinated term debt, general loan-loss reserves, and undisclosed reserves.

Tier 2 Capital less reliable than Tier 1 Capital.

Info from: https://www.investopedia.com/ask/answers/043015/what-difference-between-tier-1-capital-and-tier-2-capital.asp

//

 

 

Source of article:

https://www.businesstimes.com.sg/banking-finance/more-foreign-issuers-target-singapore-dollar-market-amid-volatility

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