Expensive lesson for Hyflux investors

Hyflux Innovation Centre in Bendemeer Road.
Hyflux Innovation Centre in Bendemeer Road.PHOTO: ST FILE

The requirement for creditors to file proofs of claim by Feb 15 clearly brought more frustration to the tens of thousands of Hyflux investors during the festive period (Company Briefs, Feb 2).

It further served as a grim reminder of the credit risks of investing in myriads of complex and confusing instruments, including the more recent popular Singapore dollar corporate perpetual bonds that had propelled the bond market's impressive growth (What is credit risk in bonds?, Feb 10).

The article on credit risks highlighted a few salient points.

The complexity of such corporate financial instruments present inherent risks, which are easy for ordinary and even savvy investors to overlook as they are not easily apparent.

Dr Zhang Weina and Associate Professor Ruth Tan rightly suggested that using credit ratings by third-party international rating agencies will provide the important stamp of assurance and confidence to guide investors.

Specifically with Hyflux, this begs the question of whether requiring its bonds to be rated will spare the pain faced by yield-hungry investors, who rushed in to buy the bonds on the lure of attractive interest rates.

While there are concerns over chief executive Olivia Lum's remuneration even as the firm was racking up debt and losses, could oversight by regulators and requirement for all bond offerings to be rated have contained Hyflux's implosion?

Will Singapore's reputation as a regulated and sound investment stronghold for safe and managed risk-taking enterprises suffer from a Hyflux blowout?

It is an expensive lesson for Hyflux investors, which hopefully will lead to stepped-up investor education and mandatory requirements to rate Singapore bonds for better transparency and investor protection.

Wee Kwee Keng

A version of this article appeared in the print edition of The Straits Times on February 14, 2019, with the headline 'Expensive lesson for Hyflux investors'. Print Edition | Subscribe