Comments on: POSB Invest SingGrowth Account

By: DBS Invest Choice Account

DBS Invest Choice Account — Tue, 01 Sep 2009 03:57:56 +0000

[...] as the POSB Invest SingGrowth Account that POSB launched back in June 2009. You can refer to the POSB Invest SingGrowth Account post for an explanation of how it [...]

By: VSL

VSL — Sun, 12 Jul 2009 14:36:33 +0000

Lion Investor,

Tks for your angle on this product. You have a point there.

One would have thought that the easiest way for POSB to raise money was to simply raise its savings and FD interest rates. But then, other banks may also do likewise. Perhaps POSB is trying to create a competitive advantage by introducing Invest SingGrowth.

The reason why I (and many others) are suspicious is due to the gross negative image of FIs over the last 9 mths. It will take time for FIs to regain their trust.

Tks again, for your views.

By: lioninvestor

lioninvestor — Sun, 12 Jul 2009 12:55:47 +0000

Hi VSL,

It’s a 5-year lock in so they would have to give better rates than a normal FD.

Question:

1) If you can “borrow” money at 1.5% pa and lend it out at 4% p.a., how much money would you want to borrow?

2) If your FD rate is very low and not attracting as much capital as you like, what would you do? Create an alternative product to attract capital from the FDs that people have in other banks.

POSB is not filthy rich. Recall that DBS just did a rights issue a few months back to raise capital. More capital is good in the current climate.

By: VSL

VSL — Sun, 12 Jul 2009 12:34:11 +0000

Hi Lion Investor,

What is the true reason for POSB to launch Invest SingGrowth, now? Surely it does not need the cash as it is filthy rich. It does not say how it is planning to use the funds raised. Is POSB trying to make amends for the screw up caused by DBS?

The only risk I see is when POSB goes bust (very unlikely) in which case investors lose their principal. Failure of any of the 4 underlying entities also does not constitute a Specified Redemption Event. The annual Fixed Payouts are not subject to market nor performance factors. No other risk is mentioned. So, if one is happy with min 7.7% interest over 5 yrs (still better than FD), isn’t this “safe” product a good deal? Or is it too good to be true?

This is POSB’s own product. Why would POSB want to pay more interest on this product when it is already paying paltry interest to millions of customers? I suspect there is an ulterior motive behind this product but I can’t put a finger on it.

By: lioninvestor

lioninvestor — Sat, 11 Jul 2009 20:34:05 +0000

Hi Del,

TM Asia Life is formerly Singapore’s Asia Life. You have heard of them? They were bought over by the Tokio Marine Holdings, a big insurer from Japan.

For HSBC offer, you just have to look at the annualised yield.

http://www.lioninvestor.com/what-i-meant-by-annualised-yield/

By: del

del — Sat, 11 Jul 2009 04:50:18 +0000

i saw this but not sure of tm asia. find hsbc’s offer v confusing. anyway, thanks

By: lioninvestor

lioninvestor — Sat, 11 Jul 2009 03:02:21 +0000

Hi Del,

One alternative is this:

http://www.lioninvestor.com/tm-nest-egg-sp-guaranteed-3/

By: del

del — Fri, 10 Jul 2009 13:03:05 +0000

hi, you mentioned for a 5-year product, there are currently other better options around. what are the other options – other than hsbc? thanks.

By: Roger

Roger — Thu, 02 Jul 2009 07:44:26 +0000

Thanks IntheKnow for your insightful analysis. I see the logic in your message. The next question I am thinking of is how the banks use the money invested. Since the banks are bearish so they would avoid investing it in equities, so how are they making money from the money invested? Initially I was thinking that they are using the money to make more money from the stock market. Where else can they be making money from our money? Thanks

By: Intheknow

Intheknow — Wed, 01 Jul 2009 03:42:59 +0000

The 15% return triggering a redemption is a ‘carrot’ to try to sell the idea of a possible early redemption if ALL the underlyings rise above 15% of their initial price. A 5 year lockin period is really very long, so the POSSIBILITY of an early redemption may make the product appear more attractive (although personally i think the chance of this happening is VERY LOW).

Once the early redemption event happens, the entire structure knockouts and neither investor or structuring bank will earn further.

This structure in fact indicates that the bank is BEARISH about equities. If they are bullish, they would not have incorporated the early redemption feature. Banks definitely want to LOCK INVESTOR FUNDS in for as long as possible while paying AS LITTLE interest as possible.

The bank is actually hoping for NO early maturity which means NO bonus payout! Hence, they are bearish.