[Need help] UOB Capital Security 4.90%

[human1969]

Hi,

Recently UOB issue a Capital Security that offer 4.90% interest.
I could not find any counter under UOB in SGX price website,
Is the CapSecurity traded like normal share ?


Thanks

 

[wahkao3]

wa! 4.9% interest!

what instrument is this? Bond? CDO?

 

[dave.c]

http://infopub.sgx.com/FileOpen/UOB-A2013-88.ashx?App=Announcement&FileID=247891

Minimum 250k

 

[lionelow]

need at least $250k denomination until 2018.

 

[human1969]

So these are not traded on SGX like normal shares ?

 

[lusunshine]

It's preference share.

non-cumulative, non-convertible and perpetual......be aware

 

[Godmode]

It's preference share.

non-cumulative, non-convertible and perpetual......be aware

As long as 4.9% and you can get your money in 5 yrs, I won't mind.

Seems like they close this offer? This was a damn good one

 

[lusunshine]

As long as 4.9% and you can get your money in 5 yrs, I won't mind.

Seems like they close this offer? This was a damn good one

Who say you can get back your money in 5 yrs? You really understand what does "PERPETUAL" means?

 

[crissangelz]

too bad, I dun hv 250k.. if nt I would have take up this offer

 

[lzydata]

http://infopub.sgx.com/FileOpen/UOB-A2013-88.ashx?App=Announcement&FileID=247891

Minimum 250k

Yup. In addition, this sheet from SGX states that "trading of the Securities is restricted to the persons specified in Sections 274 and 275 of the Securities and Futures Act 2001" i.e. for institutional and accredited investors only.

http://infopub.sgx.com/FileOpen/UOB.ashx?App=Announcement&FileID=248828

So forget it for this one. But there are some preference shares such as the DBS 4.7%, OCC 3.93% and 5.1% that are similar.

 

[Godmode]

Who say you can get back your money in 5 yrs? You really understand what does "PERPETUAL" means?

I know what perpetual means.

The Capital Securities are perpetual securities but may be redeemed at the option of UOB on 23 July 2018 (“First Call Date”) or any distribution payment date thereafter or upon the occurrence of certain redemption events specified in the terms and conditions of the Capital Securities. The principal of the Capital Securities can be written down in full or in part upon notification of non-viability by the Monetary Authority of Singapore

I do agree there is a risk but its not a bad one

 

[lusunshine]

I know what perpetual means.



I do agree there is a risk but its not a bad one

You will take a huge interest rate risk in the next 5 years and I can bet UOB will not redeem this 5 years later when interest rate rises.

 

[lzydata]

You will take a huge interest rate risk in the next 5 years and I can bet UOB will not redeem this 5 years later when interest rate rises.

That is true: that is the biggest risk that investors in such securities undertake, particularly for those such as this UOB 4.9% where the rate is fixed. Some other preference shares such as the two OCCs have floating rates after their first callable date which can mitigate the risk somewhat.

Isn't it also conceivable that UOB's credit improves in the years to come, so that even when interest rates have normalized, it is still able to borrow at more generous rates than 4.9%? I wouldn't be so quick to predict whether they will or will not redeem

 

[lusunshine]

Isn't it also conceivable that UOB's credit improves in the years to come, so that even when interest rates have normalized, it is still able to borrow at more generous rates than 4.9%? I wouldn't be so quick to predict whether they will or will not redeem

With rising interest rate, SG banks will face higher default rate on mortgages. Rating agency like Moody already expressed a negative view on this. The likelihood of downgrading is much higher than upgrading.

Moody's puts Singapore banks on "negative" outlook - Channel NewsAsia

By the way, if the property market bubble goes burst, I think UOB will get hit by the most among all banks because this bank is famous with their easy and loose credit approval for the past few years.

 

[tarui04]

is it tradable on sgx?

 

[Bustamagic]

That is true: that is the biggest risk that investors in such securities undertake, particularly for those such as this UOB 4.9% where the rate is fixed. Some other preference shares such as the two OCCs have floating rates after their first callable date which can mitigate the risk somewhat.

I read that the rate will be reset in 2018:

"The Capital Securities will bear a fixed distribution rate of 4.90% per annum, subject to a reset on the First Call Date (and every 5 years thereafter) to a rate equal to the prevailing 5-year SGD SOR plus the initial margin of 3.195%."

http://repository.shareinvestor.com...5c72045c413cf3738c6ce341f3e0dc79/type/si_news

 

[Shiny Things]

I read that the rate will be reset in 2018:

"The Capital Securities will bear a fixed distribution rate of 4.90% per annum, subject to a reset on the First Call Date (and every 5 years thereafter) to a rate equal to the prevailing 5-year SGD SOR plus the initial margin of 3.195%."

http://repository.shareinvestor.com...5c72045c413cf3738c6ce341f3e0dc79/type/si_news

The reset only happens if they don't exercise the call. It's supposed to encourage them to exercise it - the risk you're taking is that if UOB's credit deteriorates, they won't call the bonds and you'll be left holding bonds in a busted bank and earning a below-market interest rate for them. (This is incredibly unlikely, though.)

 

[l0nEr_]

The reset only happens if they don't exercise the call. It's supposed to encourage them to exercise it - the risk you're taking is that if UOB's credit deteriorates, they won't call the bonds and you'll be left holding bonds in a busted bank and earning a below-market interest rate for them. (This is incredibly unlikely, though.)

Yeah, the reset reduces the interest rate risks (coming from rising interest rates).
Asian banks have a reputation for calling their bonds on their first call date, unlike the European banks which are less capitalised. Its a reputation risk they are risking if they dont do it, coz it will cause all their bonds to reprice to yield to maturity. That said, this is still a bet since they are never obliged to call.

 

[SCG8866T]

Time to relook at this perp bond. Been droppingg sharply, now firm ask at 103.

 

[jingle_babble]

hmmm, i cant find this listed on sgx..is this a otc counter?