News – BT

No rush for govt securities through ATMs

Lack of awareness, low yields and low publicity possible contributing factors

RETAIL investors are unlikely to rush to snap up Singapore Government Securities (SGS) via ATMs due to a lack of awareness, low yields and low publicity.

‘It may take some time for SGS application via ATMs to take off,’ Wong Sui Jau, general manager of Fundsupermart, says of the recent launch. ‘I don’t expect the retail investor response to be overwhelming at this stage.’

He believes that Singaporean retail investors are relatively ‘foreign’ to the bond market at present and therefore less likely to jump on the bandwagon.

Nicholas Tan, head of group wealth management at Consumer Financial Services, expects a reasonable retail response to SGS via ATMs. ‘There has not been much publicity on this.’

DBS has found the response to be encouraging, said a bank spokeswoman.

The Monetary Authority of Singapore launched SGS application via the ATMs of the three local banks on July 1 to provide greater accessibility to retail investors. Previously, many retail investors were put off by the cumbersome application system at major banks that were primary dealers.

‘Based on what we have seen, they enjoy the convenience of submitting bids through DBS and POSB’s network of more than 930 ATMs,’ said a DBS spokeswoman.

According to Mr Wong, whether the securities are a good investment depends on the mentality of individual investors and what they are prepared to sacrifice in terms of opportunity cost.

‘The question is whether the returns are attractive,’ he said. ‘The yields at present are very low. The highest being 3.2 per cent for a bond with 17.6 year maturity. Perhaps, if the yields increase, investor interest will also increase, although not by a substantial amount.’

He advises against SGS instruments for retail investors who intend to make market timing-related investments. ‘The yields are already very low,’ he said. ‘To make a profit, they need to drop even lower. I’m not sure how low they will go.’

On the other hand, if investors plan to hold SGS instruments to maturity, they will have a certain profit in terms of yield.

With interest rates on savings and fixed deposits also low, the securities may be a good alternative for investors looking for a stable, low-risk instrument with potentially higher returns than bank savings.

Having the Singapore Government as issuer provides financial security. Investors consider SGS instruments to be a relatively safe and low-risk way of adding stability to a portfolio.

‘There is definitely a market for investments that are close to zero risk,’ Mr Wong said. ‘It is even safer than bonds sold by local banks.’

At industry level, the general sentiment among investors is that the Monetary Authority of Singapore has made a strategic move by giving retail investors greater accessibility to the SGS market.

‘Generally, any avenue that opens the market is good for investors,’ said Mr Wong. ‘It is likely to increase the liquidity of the bonds as well.’

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