The Other Side

Why more expensive buying online?

Why is same government bond more expensive to buy online?

I was attracted by the convenience of buying Singapore government bonds (15-year type) online. But upon checking the prices the difference between buying online and from a bank branch was just too much to make sense to a layman.
The 15-year bond I enquired was supposedly cheaper as per initial price indication online which then was 96.21 cents. But the online website built in a 5% buffer and with accrued interest the cost was 1.02 cents. My question is why is there a need to provide for such a large buffer of 5%? Bonds are not known to fluctuate widely, so it's not to the investor's advantage.
Buying the same bond the traditional way, which requires a trip to the bank branch, where the price quoted was 96.61 cents and with accrued interest the cost to me was 97.3 cents. Needless to say, I bought the bonds from the bank branch instead of going online because the difference was 4 cents, that's a lot of money.
The point is that customers should not be misled by the misconception that its cheaper to buy things online. Do your calculation and comparison before committing yourself to a purchase.

posted by Ek Heng @ 11:54 AM 0 comments

Not everything's honky dory with China IPOs

Are Singapore retail investors at risk with China IPOs?

It is known that some China IPO companies are less than straight in their business dealings. In fact, a study shows there is a high incidence of such questionable transactions. An article by Singapore Management University in its April 2006 issue of SMU Knowledge Hub provides disturbing insights into newly listed China companies. In a study of IPOs listings between 1999-2001 in the Shanghai Stock Exchange, the SMU analysis reveals a high incidence of such companies having active dealings with related parties which are their parent companies. The trend shows a high level of receivables from transactions with their parent companies before listing. It makes the figures look good from turnover standpoint but they translate into bad debts thereafter. “The findings are consistent with frequently publicized news of fund embezzlement of China’s newly listed companies by their controlling shareholders,” according to co-author Assistant Professor Wang Jiwei, from SMU’s School of Accountacy. Unlike institutional investors with resources, retail investors do not have the time or capacity to pore through accounts of such companies. So where does this revelation put Singapore retail investors?

posted by Ek Heng @ 5:47 PM 0 comments