Retail investors in Singapore will find it easier to buy bonds; MAS and SGX unveil proposals

The Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX) are seeking the public's views on proposed changes to facilitate bond offerings to retail investors. -- PHOTO: REUTERS
The Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX) are seeking the public's views on proposed changes to facilitate bond offerings to retail investors. -- PHOTO: REUTERS

WHEELS are being set in motion for the man-in-the-street here to make it easier for them to invest in bonds, if proposals drawn up by authorities are eventually adopted.

The Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX) are seeking the public's views on proposed changes to facilitate bond offerings to retail investors.

Retail investors will find the bonds more affordable and will have a wider choice of bonds to invest in under the proposed changes.

Central to the proposals is the setting up of a so-called "seasoning framework", where bonds that have been listed for six months, or seasoned, will be made available to retail investors.

Seasoned bonds issued by issuers that meet eligibility criteria stipulated by SGX can be re-denominated into smaller lot sizes and made available to retail investors via secondary trading.

This addresses a major gripe long voiced by retail investors keen on the prospects of having an investment like a bond that offers a steady stream of income but are regularly priced out of the market.

Most corporate bonds are sold to sophisticated investors like institutional or accredited ones, at $250,000 a pop.

Safeguards will still be in place to protect retail investors.

For example, the scope of the proposed prospectus exemptions will be confined to plain vanilla unsubordinated bonds with a maximum tenor of ten years.

Convertible and perpetual bonds, as well as other hybrid instruments, will be excluded. Issuers will also be required to provide retail investors with key information relating to the features and risks of the bonds for the offers exempted from prospectus requirements.

MAS managing director Ravi Menon said in a statement that the proposals are aimed at availing new investment options to retail investors.

"Low global interest rates have spurred a search for yield, sometimes in risky and unconventional schemes or concentrated investments in property.

"At the same time, growing financial awareness has spurred demand for a broader range of retail investment products, including for retirement savings."