SINGAPORE AIRLINES' BONDS ISSUE

SINGAPORE AIRLINES' BONDS ISSUE

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(Lessons from Minibonds saga): **

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Mdm Ho Geok Choo asked the Senior Minister in view of the success of mainboard-listed Singapore Airlines' bonds issue, whether there are any lessons or pre-emptive measures which can be drawn from the Minibonds saga.

Mr Goh Chok Tong: The development of the Singapore Government Securities and corporate bond markets provides investors with more investment choices, and serves as a complementary pillar of corporate fund-raising, in addition to bank and equity financing. In this regard, the Monetary Authority of Singapore (MAS) has been working with stakeholders to build a deep and vibrant bond market.

The financial crisis over the last two years has however shown that what may be perceived as less complex or safe products may not necessarily be so in a turbulent market. While investment products such as plain vanilla corporate bonds are less complex than structured notes, these products still carry investment risks, including counterparty and interest rate risks. These risks also vary across issuers and market cycles. For instance, while such products may appear attractive in the current low interest rate environment, their prices may be affected when interest rates rise.

The Securities and Futures Act requires the disclosure of all information that retail investors and their professional advisers would reasonably require to make an informed assessment of the product. This includes the risks associated with the issuer as well as the product.

Recently, MAS, in consultation with the industry, conducted a review of the regulatory regime for listed and unlisted investment products and has developed proposals to further safeguard consumers' interests and promote higher industry standards. MAS aims to put in place the necessary legislation to effect these changes by 2011.

Investors must also play their part in making informed investment decisions and invest in their own financial literacy. The financial crisis has reinforced the importance of investors equipping themselves with the necessary knowledge and skills and investing

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only in products that they understand. MoneySENSE was launched in 2003 as a national financial education programme to provide consumers with knowledge and skills to enable them to make informed financial decisions. More recently, MoneySENSE has stepped up efforts to educate consumers on specific investment products. This includes arranging educational seminars and publishing articles on what consumers should consider before investing in various investment products such as structured notes and Singapore Government Securities. MoneySENSE has also been partnering MediaCorp on a series of "Mind Your Money" seminars and radio programmes to bring financial education to consumers. Going forward, MoneySENSE will be working with media to educate consumers on various new and common investment products offered to retail investors.

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