Mr. Tan,
Many of the investors here bought the the Mini Bonds before the sub-prime crisis surfaced in the 2H of 2007. At that time, the bonds didn't look high risk, did it?
Given its rating at that time, people knew there was a small chance the issuer would default. Even banks and other companies could fail at any time--there is a small chance. But in good times, people were willing to take the risk.
There are many banks and insurance companies currently having the same rating as Lehman had before it failed. Would you call them "high risk" too?
REPLY
You appear to be speaking for the financial institution that sold the products.
The credit linked securities are high risk. It is not just the risk of Lehman Brothers. The risk is muliplied at least 10 times due to the way that the product is structured. Even in good times, this product should never be approved and should never be sold.
Read this explanation:
http://tankinlian.blogspot.com/2008/10/possibel-wrong-doings-in-structured.html
I have written about it more one year ago, when times are good, to ask investors to avoid this type of product. (At that time, I was not aware about the extent of the risk - due to its complicated structure and lack of tranparency. I am now horrified to learn about the extent of the risk.
Sunday, October 12, 2008
Low cost investment funds
Many retirees lost their life time savings through bad investment products sold by the trusted financial institutions. These institutions sold products that earned a high profit margin, but were highly risky to the retirees.
There is a need for a new institution, similar to the Central Provident Fund, to serve our retirees. This institution should operate as follows:
1. Be non-profit driven
2. Offer a few large, well diversified funds of Government bonds, corporate bonds, equities and property REITS.
3. The funds should have low fees, just sufficient to cover the operating expenses
4. The operating expenses should be kept low through streamlined, efficient systems
5. No commission should be paid for the marketing of these funds.
This is similar to the concept of the "private pension plans" that was considered by the Central Provident Fund a few years ago, but was shelved. It is time to revive this plan and offer it to both existing CPF members and also to retirees.
It is also desirable for the fund to enjoy some tax benefits, so as to encourage people to invest their savings in these funds.
There is a need for a new institution, similar to the Central Provident Fund, to serve our retirees. This institution should operate as follows:
1. Be non-profit driven
2. Offer a few large, well diversified funds of Government bonds, corporate bonds, equities and property REITS.
3. The funds should have low fees, just sufficient to cover the operating expenses
4. The operating expenses should be kept low through streamlined, efficient systems
5. No commission should be paid for the marketing of these funds.
This is similar to the concept of the "private pension plans" that was considered by the Central Provident Fund a few years ago, but was shelved. It is time to revive this plan and offer it to both existing CPF members and also to retirees.
It is also desirable for the fund to enjoy some tax benefits, so as to encourage people to invest their savings in these funds.
Elected President of Singapore
Dear Mr. Tan,
Several people have called you to stand for elected President of Singapore. The country needs a person of integrity and courage to speak for the ordinary people and act as a check and balance against the current Government. You can play this role effectively and will get the support of the people. Will you consider?
Several people have called you to stand for elected President of Singapore. The country needs a person of integrity and courage to speak for the ordinary people and act as a check and balance against the current Government. You can play this role effectively and will get the support of the people. Will you consider?
Hit by Forex Losses
Are you hit for forex losses?
Do you wish to meet other investors in the same situation?
http://www.petitiononline.com/PCFXT1/petition.html
Do you wish to meet other investors in the same situation?
http://www.petitiononline.com/PCFXT1/petition.html
Dual Currency Deposit (DCD)
From a journalist:
In Europe the DCD (dual currency deposit) product is generally only marketed to High-net-worth individuals through private banks and is rarely seen in any retail networks, probably because many retail investors in Europe don't speculate in currencies. But in Asia the DCD is a very popular instrument among retail investors.
The product is relatively simple but, as is emerging now, dangerous too. There is no protection on the product and when steep currency movements occur the deposit can be hit badly.
I'm looking into number of products that are denominated in either SG$ or HK$ against the Aus$. About a month ago a lot of investors got burned, and i believe the same has happened over the past week. I will probably also incorporate FX accumulator and decumulator products in the story as there has been some movement there too.
Action: If you have invested in these products and had suffered large losses, and wish to shrae your story (maybe not using your real name), you can send your story to kinlian@gmail.com
In Europe the DCD (dual currency deposit) product is generally only marketed to High-net-worth individuals through private banks and is rarely seen in any retail networks, probably because many retail investors in Europe don't speculate in currencies. But in Asia the DCD is a very popular instrument among retail investors.
The product is relatively simple but, as is emerging now, dangerous too. There is no protection on the product and when steep currency movements occur the deposit can be hit badly.
I'm looking into number of products that are denominated in either SG$ or HK$ against the Aus$. About a month ago a lot of investors got burned, and i believe the same has happened over the past week. I will probably also incorporate FX accumulator and decumulator products in the story as there has been some movement there too.
Action: If you have invested in these products and had suffered large losses, and wish to shrae your story (maybe not using your real name), you can send your story to kinlian@gmail.com
Weekly Speeches at Speaker's Corner
I have registered to speak at Speaker's Corner, Hong Lim Green as follows:
Date: Sat 25 Oct, 5 to 7 pm
Date: Sat 1 Nov, 5 to 7 pm
Date: Sat 8 Nov (cancelled)
Date: Sat 15 Nov 5 to 7 pm
My speech will be short, for about 10 mins.
After hearing my speech, the investors can gather in groups (according to distributor, product or postal district) to exchange views and discuss collective action.
All the best.
Date: Sat 25 Oct, 5 to 7 pm
Date: Sat 1 Nov, 5 to 7 pm
Date: Sat 8 Nov (cancelled)
Date: Sat 15 Nov 5 to 7 pm
My speech will be short, for about 10 mins.
After hearing my speech, the investors can gather in groups (according to distributor, product or postal district) to exchange views and discuss collective action.
All the best.
Tan Kin Lian's speech at Speaker's Corner
Mr. Tan,
Here is the YouTube Video Clip link of your speech at Hong Lim. I broke it into 2 parts because unedited file too large:
http://www.youtube.com/watch?v=rQ3xTRnd8J8 (PART 1)
http://www.youtube.com/watch?v=WCfpgMinQvI (PART 2)
Thomas Choy
Here is the YouTube Video Clip link of your speech at Hong Lim. I broke it into 2 parts because unedited file too large:
http://www.youtube.com/watch?v=rQ3xTRnd8J8 (PART 1)
http://www.youtube.com/watch?v=WCfpgMinQvI (PART 2)
Thomas Choy
Minibond invetors are not risk takers
Dear Mr. Tan
I think there is a way to prove that the investors are not risk takers. If an investor is interested to get a higher rate than those offered by FD, they would have invested in NZ FD as the rate was more than 7%.
As the investors are not willing to take currency risk, they are not willing to put their money into foreign currency FD. If that is the case, the investors are not risk takers and there is no reason why the investors are willing to invest in a high risk product like mini bond that offer only 5% with the risk of losing the whole investment if things go wrong. This argument has proven that it is obvious that the investors were not told of such risk in mini-bond investments by the RM.
I believe if the investors put up their cases in the above manner, their cases are stronger. Hope that the info is useful for the investor.
V
I think there is a way to prove that the investors are not risk takers. If an investor is interested to get a higher rate than those offered by FD, they would have invested in NZ FD as the rate was more than 7%.
As the investors are not willing to take currency risk, they are not willing to put their money into foreign currency FD. If that is the case, the investors are not risk takers and there is no reason why the investors are willing to invest in a high risk product like mini bond that offer only 5% with the risk of losing the whole investment if things go wrong. This argument has proven that it is obvious that the investors were not told of such risk in mini-bond investments by the RM.
I believe if the investors put up their cases in the above manner, their cases are stronger. Hope that the info is useful for the investor.
V
Big loss on dual currency investment
Dear Mr Tan,
My mother told me that she invested in a dual currency investment ( USD, New zealand dollar, yen) for about USD $500K from her retirement saving, and suddenly the bank told her that she lost all her money, and if she want to stay and get her money back she need to inject another $500k.
So what should we do, I'm not familiar with dual currency investment, and neither does she. Does it means that she lost all her retirement money? Is it true if we inject the money $500k will cover the lost for the other 500k?
I really appreciate your advice.
REPLY
Please ask your mother to get a detailed statement and explanation from the bank. You can send it to me.
You can register the particulars of your mother in this Petition:
http://www.PetitionOnline.com/PCFXT1/petition.html
My mother told me that she invested in a dual currency investment ( USD, New zealand dollar, yen) for about USD $500K from her retirement saving, and suddenly the bank told her that she lost all her money, and if she want to stay and get her money back she need to inject another $500k.
So what should we do, I'm not familiar with dual currency investment, and neither does she. Does it means that she lost all her retirement money? Is it true if we inject the money $500k will cover the lost for the other 500k?
I really appreciate your advice.
REPLY
Please ask your mother to get a detailed statement and explanation from the bank. You can send it to me.
You can register the particulars of your mother in this Petition:
http://www.PetitionOnline.com/PCFXT1/petition.html
Forex or dual currency transactions
Dear Mr. Tan,
After reading your blog, I am really impressed by your untiring effort to help us, the poor retail investors who are 'cheated' by our financial institutions.
In my case it is not the structured products, but in forex trading by a foreign bank. Please advise how I could form a group of interested parties who may have suffered the same problem as me in taking a class action against this particular bank which I will not name.
REPLY
I have created this Petition for customers in similar situation to give their particulars.
http://www.petitiononline.com/PCFXT1/petition.html
After reading your blog, I am really impressed by your untiring effort to help us, the poor retail investors who are 'cheated' by our financial institutions.
In my case it is not the structured products, but in forex trading by a foreign bank. Please advise how I could form a group of interested parties who may have suffered the same problem as me in taking a class action against this particular bank which I will not name.
REPLY
I have created this Petition for customers in similar situation to give their particulars.
http://www.petitiononline.com/PCFXT1/petition.html
SCMP: Banks risked reputations, watchdog says
South China Morning Post (Hong Kong) - October 12, 2008
Author: Loretta Fong, Celine Sun and Eva Wu
The controversy over the sale of minibonds to small investors held a lesson for banks, the Hong Kong Monetary Authority's executive director said yesterday.
"A bank's reputation can easily be jeopardised when it sells high-risk derivative products to small investors. I think we need to review this practice in future," said Raymond Li Ling-cheung.
The authority has received 8,300 complaints from investors in minibonds issued or guaranteed by bankrupt US bank Lehman Brothers.
Hongkongers bought HK$15.7 billion of minibonds and related complex derivatives from banks and brokerages and stand to lose much or all their money. Many claim banks mis-sold the products as low-risk.
Of the complaints it has received, the authority has so far assessed 600 and found 71 require investigation.
Banks or their staff found to have misled customers may be fined or censured or may have their business licences suspended.
Minibond buyers seeking to recover their investments held fresh talks yesterday with some of the banks that sold them. HKMA deputy chief executive Choi Yiu-kwan said the government's proposal that banks buy back minibonds at current value was the best way for them to recover some of their losses.
The authority is preparing a report for the government on the sale of minibonds.
Meanwhile, Hong Kong Exchanges and Clearing chairman Ronald Arculli admitted its board of directors did not study an internal report drafted five years ago that warned of a lack of oversight of the sale of complex derivatives such as minibonds.
"Colleagues passed the report to the management. But it was found that the worries exposed by the report would not affect much the operations of HKEx. Thus there was no follow-up afterwards," he said.
Author: Loretta Fong, Celine Sun and Eva Wu
The controversy over the sale of minibonds to small investors held a lesson for banks, the Hong Kong Monetary Authority's executive director said yesterday.
"A bank's reputation can easily be jeopardised when it sells high-risk derivative products to small investors. I think we need to review this practice in future," said Raymond Li Ling-cheung.
The authority has received 8,300 complaints from investors in minibonds issued or guaranteed by bankrupt US bank Lehman Brothers.
Hongkongers bought HK$15.7 billion of minibonds and related complex derivatives from banks and brokerages and stand to lose much or all their money. Many claim banks mis-sold the products as low-risk.
Of the complaints it has received, the authority has so far assessed 600 and found 71 require investigation.
Banks or their staff found to have misled customers may be fined or censured or may have their business licences suspended.
Minibond buyers seeking to recover their investments held fresh talks yesterday with some of the banks that sold them. HKMA deputy chief executive Choi Yiu-kwan said the government's proposal that banks buy back minibonds at current value was the best way for them to recover some of their losses.
The authority is preparing a report for the government on the sale of minibonds.
Meanwhile, Hong Kong Exchanges and Clearing chairman Ronald Arculli admitted its board of directors did not study an internal report drafted five years ago that warned of a lack of oversight of the sale of complex derivatives such as minibonds.
"Colleagues passed the report to the management. But it was found that the worries exposed by the report would not affect much the operations of HKEx. Thus there was no follow-up afterwards," he said.
Nadya "Speaker" Zagarodnova
My second grand-daugher Nadya was borne at 6 p.m. on Saturday 11 October. I will nickname her as "Speaker" as this was the same time that I was giving the speech to 1,000 people at Speaker's Corner.
She was 4.5 kg (10 lbs) at birth. This makes her the biggest baby that was borne within my family. She is also the biggest baby delivered by the gynaecologist looking after my daughter Su Ling.
My son-in-law Vitali came from Russia. He teaches in Nanyang Technological University.
She was 4.5 kg (10 lbs) at birth. This makes her the biggest baby that was borne within my family. She is also the biggest baby delivered by the gynaecologist looking after my daughter Su Ling.
My son-in-law Vitali came from Russia. He teaches in Nanyang Technological University.
Send this message to your Member of Parliament
Dear (Member of Parliament)
We are a group of residents in you constituencey who are affected by the recent default of the structured products. Our names are shown below (provide a list of affected residents).
We wish to meet you tell you about our grievances. Please click on the link below to hear a recording of the grievance of the investors at yesterday Speaker Corner.
http://www.youtube.com/watch?v=ZzpYO2NunEY
We are a group of residents in you constituencey who are affected by the recent default of the structured products. Our names are shown below (provide a list of affected residents).
We wish to meet you tell you about our grievances. Please click on the link below to hear a recording of the grievance of the investors at yesterday Speaker Corner.
http://www.youtube.com/watch?v=ZzpYO2NunEY
Weekly meetings at Hong Lim Green?
An investor suggested that Hong Lim Green is a suitable place for investors to meet each week on Saturday at 6 to 7 pm.
It is big enough for many several group meetings (by distributor or product) to be held. It is also useful for the investors to exchange notes. It is quite convenient as it is within walking distance of the Clarke Quay and Raffles Place MRT stations.
The meeting can be with, or without, speeches.
Do you think that this is a good idea?
It is big enough for many several group meetings (by distributor or product) to be held. It is also useful for the investors to exchange notes. It is quite convenient as it is within walking distance of the Clarke Quay and Raffles Place MRT stations.
The meeting can be with, or without, speeches.
Do you think that this is a good idea?
Why the credit linked notes are highly risky
Some anonymous postings claimed that the structured products are linked to six entities that are rated A or higher at the time of issue, and are therefore safe. Nobody could have forseen that these companies could get into bankrupcy.
This argument is not correct. These structured products are highly risky for the following reasons:
1. The structured products take a bet on the six reference entities. The failure (or credit event) on any one entity could cause the loss of the entire capital. The presence of six entities (i.e. swaps) increases the risk six-fold.
2. The money received under the structure is invested in lower quality assets, such as collateralised debt obligations (CDO) to earn a high rate of return. Additional bets (i.e. swaps) could be taken on the failures of these underlying assets.
I estimate that the income stream of the structure could be 10% or more each year. If so, this will classify the structure as a junk bond, which is highly risky. However, it seems that only 5% is given to the investors for the high risk that they are shouldering.
These figures are just my guess. I hope that the Monetary Authority of Singapore will carry out the investigation, as asked by the Petition, to will look into the actual accounts of the structure, i.e. the income stream, the expenses and profits that are taken out, and if the parties had observed their fiduciary duty to the investors.
This argument is not correct. These structured products are highly risky for the following reasons:
1. The structured products take a bet on the six reference entities. The failure (or credit event) on any one entity could cause the loss of the entire capital. The presence of six entities (i.e. swaps) increases the risk six-fold.
2. The money received under the structure is invested in lower quality assets, such as collateralised debt obligations (CDO) to earn a high rate of return. Additional bets (i.e. swaps) could be taken on the failures of these underlying assets.
I estimate that the income stream of the structure could be 10% or more each year. If so, this will classify the structure as a junk bond, which is highly risky. However, it seems that only 5% is given to the investors for the high risk that they are shouldering.
These figures are just my guess. I hope that the Monetary Authority of Singapore will carry out the investigation, as asked by the Petition, to will look into the actual accounts of the structure, i.e. the income stream, the expenses and profits that are taken out, and if the parties had observed their fiduciary duty to the investors.
Speaker's Corner - 11 October 2008
Coverage in The Online Citizen, including special video interviews and comments by readers:
http://theonlinecitizen.com/2008/10/more-than-1000-people-at-speakers-corner/#comments
http://theonlinecitizen.com/2008/10/more-than-1000-people-at-speakers-corner/#comments
Panic of AIA policyholders
Dear Mr. Tan Kin Lian:
I'm a journalist. We read your blog and see many AIA policyholders seeking your advice. We are very interested. How big a problem is AIA facing? How are policyholders reacting to the problem? Do you find their worries reasonable or unreasonable?
REPLY
The policyholders of AIA (American International Assurance) were worried about the safety of their insurance savings when they heard about the financial trouble facing AIA's parent company, AIG (American International Group). At that time, they learned that AIG had to be find additional capital of USD 80 billion (not sure about the exact figure), failing which AIG had to declare bankrupcy. They were worried that their savings would be locked up during the bankrupcy or worse still, disappeared entirely.
Many policyholders queued up to terminate their policies and receive the cash values. They are willing to take a loss, as the cash value is less than the premiums that they have paid, and the penalty is quite high for policies that are terminted during the early years of the insurance policy.
A total of 5,000 policies were reported to be surrendered during the first two years. Many of these policyholders formed large queues outside of the office of AIA. This caused other policyholders to be alarmed.
Some of the AIA policyholders sent e-mails to seek my advice. I advised them not to panic and not to surrender their policies. My reasons were given in this blog:
http://tankinlian.blogspot.com/2008/09/is-your-money-safe-with-aia.html
On the following days, the regulator, i.e. Monetary Authority of Singapore, and AIA issued similar statements to assure the policyholders.
There was no need for the policyholders to panic, as their insurance savings are kept in a separate fund for Singapore policies. This fundwas, to my knowledge, solvent and in good financial state. Even if there is financial difficulty facing AIA (and there was none at that time), there is provision in the Insurance Act for the regulator to activate the Policyowners Protection Fund. This fund would guarantee 90 percent of the liability under a life insurance policy. This is much better than taking the cash value, as the penalty is higher for a surrendered policy.
I do my best to educate the public about the actual situation and to help them avoid taking the wrong action that will result in making a loss on their savings.
I'm a journalist. We read your blog and see many AIA policyholders seeking your advice. We are very interested. How big a problem is AIA facing? How are policyholders reacting to the problem? Do you find their worries reasonable or unreasonable?
REPLY
The policyholders of AIA (American International Assurance) were worried about the safety of their insurance savings when they heard about the financial trouble facing AIA's parent company, AIG (American International Group). At that time, they learned that AIG had to be find additional capital of USD 80 billion (not sure about the exact figure), failing which AIG had to declare bankrupcy. They were worried that their savings would be locked up during the bankrupcy or worse still, disappeared entirely.
Many policyholders queued up to terminate their policies and receive the cash values. They are willing to take a loss, as the cash value is less than the premiums that they have paid, and the penalty is quite high for policies that are terminted during the early years of the insurance policy.
A total of 5,000 policies were reported to be surrendered during the first two years. Many of these policyholders formed large queues outside of the office of AIA. This caused other policyholders to be alarmed.
Some of the AIA policyholders sent e-mails to seek my advice. I advised them not to panic and not to surrender their policies. My reasons were given in this blog:
http://tankinlian.blogspot.com/2008/09/is-your-money-safe-with-aia.html
On the following days, the regulator, i.e. Monetary Authority of Singapore, and AIA issued similar statements to assure the policyholders.
There was no need for the policyholders to panic, as their insurance savings are kept in a separate fund for Singapore policies. This fundwas, to my knowledge, solvent and in good financial state. Even if there is financial difficulty facing AIA (and there was none at that time), there is provision in the Insurance Act for the regulator to activate the Policyowners Protection Fund. This fund would guarantee 90 percent of the liability under a life insurance policy. This is much better than taking the cash value, as the penalty is higher for a surrendered policy.
I do my best to educate the public about the actual situation and to help them avoid taking the wrong action that will result in making a loss on their savings.
New blog for investors of Credit Linked Securities
This blog allows investors to get in touch with each other. Separate sections have been created according to distributor and products.
http://creditlinkedsecurities.blogspot.com/
http://creditlinkedsecurities.blogspot.com/
STI Exchange Traded Fund
The STi Exchange Traded Fund is a fund, like a unit trust. It is an indexed fund, and is invested in the top 30 shares of the ST Index. It is NOT a derivative.
More details can be found here:
http://www.streettracks.com.sg/ssga/jsp/en/pressRelease-article2.jsp
If you wish to buy the this Fund, you have to consult your stockbroker.
More details can be found here:
http://www.streettracks.com.sg/ssga/jsp/en/pressRelease-article2.jsp
If you wish to buy the this Fund, you have to consult your stockbroker.
Investing in difficult times
Dear Mr. Tan,
Is it safe to put money in the bank anymore? If not, where can I invest my money? I am scared even to leave the money in the bank as the banks are no longer safe, and they may ask me to invest in the minibonds and other risky products, without my knowledge.
REPLY
My wife asked me the same question. I advised her to buy the STI Exchange Traded Fund. It is a fund comprise of the top 30 shares in Singapore. My reasons are:
1. These are the 30 largest companies listed in Singapore
2. The dividends paid average about 5%, based on the current price. It is paid in two installments every 6 months.
3. If this is for a long term investment, it does not matter if the share prices comes down further. It will eventually recover (maybe in a few years' time and make a good capital gain)
4. If the recession continues for one or two years and the profits of the companies drop by 50%, these shares will still give a dividend of 2.5% (which is better than bank deposit or government bonds).
5. Invest for the long term. Be bold.
Another alternative is to invest in a few RIETs. Many of them have a dividend payout of 10% now. Even if the rentals fall by 50%, the dividend payout is 5%. Make sure that these REITS do not have high leverage.
Is it safe to put money in the bank anymore? If not, where can I invest my money? I am scared even to leave the money in the bank as the banks are no longer safe, and they may ask me to invest in the minibonds and other risky products, without my knowledge.
REPLY
My wife asked me the same question. I advised her to buy the STI Exchange Traded Fund. It is a fund comprise of the top 30 shares in Singapore. My reasons are:
1. These are the 30 largest companies listed in Singapore
2. The dividends paid average about 5%, based on the current price. It is paid in two installments every 6 months.
3. If this is for a long term investment, it does not matter if the share prices comes down further. It will eventually recover (maybe in a few years' time and make a good capital gain)
4. If the recession continues for one or two years and the profits of the companies drop by 50%, these shares will still give a dividend of 2.5% (which is better than bank deposit or government bonds).
5. Invest for the long term. Be bold.
Another alternative is to invest in a few RIETs. Many of them have a dividend payout of 10% now. Even if the rentals fall by 50%, the dividend payout is 5%. Make sure that these REITS do not have high leverage.
Speech at Speaker's Corner: 11 Oct 2008
Courtesy of The Online Citizen:
Part 1:
http://www.youtube.com/watch?v=xskGbufFUAM
Part 2:
http://www.youtube.com/watch?v=14Ln_gtm3KI
Part 3:
http://www.youtube.com/watch?v=1kobyOql3EE
Part 1:
http://www.youtube.com/watch?v=xskGbufFUAM
Part 2:
http://www.youtube.com/watch?v=14Ln_gtm3KI
Part 3:
http://www.youtube.com/watch?v=1kobyOql3EE
Hong Kong: DBS first bank to repay bonds
DBS first bank to repay bonds
By Lillian Liu - China Daily(HK Edition)
Updated: 2008-10-10 07:36
DBS said it will redeem 70 investors' Lehman Brothers-related products sold by the bank, making it the first financial institution in Hong Kong to compensate investors in response to the government's pledge to help the bond holders recover some losses quickly.
Some 21 banks in Hong Kong, according to the Hong Kong Monetary Authority (HKMA), have sold minibonds and similar products backed by Lehman Brothers, which was the fourth-largest investment bank in the US until its collapse last month.
A spokeswoman at DBS said the bank is only responsible for the structural bonds, while other bonds related to Lehman Brothers were issued by another firm.
She said the bank has designated accounting firm KPMG to revalue the products to be bought back and did not rule out the possibility that some bond buyers will be totally refunded.
Analysts said DBS set a good example for other banks having issued Lehman Brothers-related products, but noted that it may be a while before investors actually receive their compensation.
Tens of thousands of Hong Kong people invested a total of HK$15.6 billion in the Lehman Brothers-backed derivatives, and they all face substantial losses.
The number of complaints concerning Lehman Brothers-related products has increased sharply to 7,730 from 5,500, and will grow further, the HKMA said yesterday. The authority has opened an investigation into whether the banks misled investors into buying them, it said.
"But we cannot comment on how long it will take to investigate the problems, because it depends on the capacity of the investigation team and availability of information provided," HKMA Executive Director Raymond Li told reporters at a press conference yesterday.
Y K Choi, deputy chief executive of the HKMA, said that to avoid similar cases in the future, the HKMA - the city's de facto central bank - is studying which risky financial products can be sold to retail investors and which should not be.
Among the total complaints received by HKMA, 6,012 cases are in the initial processing phase, while 1,476 cases require verification, and 242 complaints have been put in assessment for further action.
Li said investors complained they were misled into thinking they were buying a form of corporate bonds and were unaware until recently that the bonds were guaranteed by troubled Lehman Brothers.
They accused the banks of not fully disclosing the risks involved.
Some minibonds consist of high-risk derivatives such as synthetic collateralized debt obligations and credit default swaps.
http://www.chinadaily.com.cn/hkedition/2008-10/10/content_7092404.htm
By Lillian Liu - China Daily(HK Edition)
Updated: 2008-10-10 07:36
DBS said it will redeem 70 investors' Lehman Brothers-related products sold by the bank, making it the first financial institution in Hong Kong to compensate investors in response to the government's pledge to help the bond holders recover some losses quickly.
Some 21 banks in Hong Kong, according to the Hong Kong Monetary Authority (HKMA), have sold minibonds and similar products backed by Lehman Brothers, which was the fourth-largest investment bank in the US until its collapse last month.
A spokeswoman at DBS said the bank is only responsible for the structural bonds, while other bonds related to Lehman Brothers were issued by another firm.
She said the bank has designated accounting firm KPMG to revalue the products to be bought back and did not rule out the possibility that some bond buyers will be totally refunded.
Analysts said DBS set a good example for other banks having issued Lehman Brothers-related products, but noted that it may be a while before investors actually receive their compensation.
Tens of thousands of Hong Kong people invested a total of HK$15.6 billion in the Lehman Brothers-backed derivatives, and they all face substantial losses.
The number of complaints concerning Lehman Brothers-related products has increased sharply to 7,730 from 5,500, and will grow further, the HKMA said yesterday. The authority has opened an investigation into whether the banks misled investors into buying them, it said.
"But we cannot comment on how long it will take to investigate the problems, because it depends on the capacity of the investigation team and availability of information provided," HKMA Executive Director Raymond Li told reporters at a press conference yesterday.
Y K Choi, deputy chief executive of the HKMA, said that to avoid similar cases in the future, the HKMA - the city's de facto central bank - is studying which risky financial products can be sold to retail investors and which should not be.
Among the total complaints received by HKMA, 6,012 cases are in the initial processing phase, while 1,476 cases require verification, and 242 complaints have been put in assessment for further action.
Li said investors complained they were misled into thinking they were buying a form of corporate bonds and were unaware until recently that the bonds were guaranteed by troubled Lehman Brothers.
They accused the banks of not fully disclosing the risks involved.
Some minibonds consist of high-risk derivatives such as synthetic collateralized debt obligations and credit default swaps.
http://www.chinadaily.com.cn/hkedition/2008-10/10/content_7092404.htm
Subscribe to:
Posts (Atom)