Saturday, October 20, 2018

T2023 S$ Temasek Bond

By now, quite a number of financial bloggers had covered the upcoming T2023 S$ Temasek Bond (the Bond), so I will just give my opinion from a Bedokian Portfolio investor’s point of view.

Bond Overview

Let us have a look at the details of the Bond:

Figure 1 – Overview of the T2023 S$ Temasek Bond1

As highlighted in my ebook The Bedokian Portfolio2, a bond is consisted of three basic components; the bond principal, the coupon rate and the bond maturity date. From the information in Fig. 1, the bond principal is at least Singapore Dollar (S$) 1,000.00 (for public offer, i.e. you and me), the coupon rate is 2.7% and the maturity date is on 25 October 2023 (five years).

So if a bond holder holds S$1,000.00 worth of the Bond, he/she will be getting S$27.00 a year, in two six-monthly payouts of S$13.50 each (S$27.00/2 = S$13.50). If the bond holder holds the Bond till maturity, he/she will get a total of S$135.00 in coupons, and the S$1,000.00 back.

The bond issuer is Temasek Financial (IV) Private Limited, and the guarantor is Temasek Holdings (Private) Limited. From the product highlights sheet3, the bond issuer is a wholly owned subsidiary of the guarantor. Both the issuer and guarantor are being rated AAA and Aaa by credit ratings agencies Standard & Poor’s and Moody’s respectively, thus making this an investment-grade bond.

The Bond will be listed on the Singapore Exchange (SGX), meaning it can be traded just like any other company shares and bonds (government and corporate).

The Bedokian’s Take

If you were following the bond selection criteria in the ebook4, this bond would suit you to a T, especially if you can get it during the public offering; at par value, investment grade credit rating, and at least five years to maturity.

However, as with any financial instrument, caveats in the form of risks apply. The product highlights sheet had mentioned a number of risk factors, some of which reflected what I had mentioned in my ebook5. Although the default risk (risk of non-payment of coupons and/or principal) is minimal (we all have heard of Temasek Holdings (Private) Limited), I would think two other risks, namely volatility risk and rate risks, apply to this Bond, and these two risks affect each other as well.

As you can recall, this Bond will be listed in the financial markets, thus it is subjected to demand and supply which results in market price changes, hence volatility risk. Rate risks refer to the impact of interest rate and inflation rate on the Bond; if both rates are higher than the coupon rate, then it is not worthwhile to hold onto the Bond, therefore the demand of the Bond may drop and along goes with the market price (back to volatility risk), ceteris paribus.

The Bond’s coupon rate is relatively lower than that of other corporate bonds’, granted that it has a shorter duration than the rest, but it is higher than government bonds of the same duration. Hence categorizing this Bond based on its coupon rate, I would place it between government and corporate.

If you want to invest in this Bond, do try to get it at the public offering stage and remember to adhere to the 12% limit rule, and if possible, hold it till maturity.

1 – Temasek. T2023-S$ Temasek Bond Offer. Bond Offer Summary. (accessed 20 Oct 2018)

2 – The Bedokian Portfolio, p29

3 – Temasek. T2023-S$ Temasek Bond Offer. Bond Offering Documents. Product Highlights Sheet. (accessed 20 Oct 2018)

4 – The Bedokian Portfolio, p100-101

5 – ibid, p33-34

Further Reading

Saturday, October 13, 2018

The Red Scare

The whole world went red during the period of 10-11 October, sending investors and traders alike panicking. Fear and anxiety gripped the financial markets as almost all major indices took a nosedive during those two days.

While I shall not dwell on what really happened and will this happen again next week (short answer: I don’t know), but we can learn a few quick lessons from this tumultuous session.

Lesson #1 – Do Not Panic

When news buzzed around about the fall of share prices and indices sometime on the morning of 10 October, some investors around me began to panic. The panic I saw was on a scale, ranging from ‘I am now at a loss from my entry position’ to ‘Oh no! The crash is coming!’. If one is experiencing such panic, it is normal, but if one starts to act on this panic, then it is worrisome. Panic selling not only results in losses incurred, but also clouds your judgment.

Take a step back and observe. A sound investor see things in a calm manner, even if the sky is rising or falling around.

Lesson #2 – Look For Opportunities

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." – Warren Buffett

"The way to make money is to buy when blood is running in the streets." - John D. Rockefeller / Nathan M. Rothschild

The above two quotes are quite self-explanatory. When crisis hits, first is to follow lesson #1. Then look out for fundamentally sound companies whose prices had fallen just for the sake of it without any valid reason. Thinking about this and putting it bluntly, we are capitalising on the panic of others; a panic sell will drive the price down, since supply will be more than demand, and we would be happy to be on the demand side for this round. Well, this is business.

Lesson #3 – Correlation Is Observed

In that two-day period, the price of gold spiked from United States Dollar (US$) 1190 to about US$1220, a 2.5% increase, as investors tried to preserve their capital by moving away from equities to gold, typically seen as a safe haven. With the demand for gold goes up, so does its price. This is an example of correlation between asset classes at work.

I had run a correlation test between the iShares MSCI World ETF (URTH), representing the world’s equity asset class, and the SPDR Gold ETF (GLD) for the period of 7 – 12 Oct 2018 using tools from the Portfolio Visualizer site. The correlation score between URTH and GLD is -0.581, meaning there is negative correlation between these two during that time.


I hope the above (very) short lessons will better prepare you for the coming weeks ahead should the markets turn south. Meanwhile enjoy the weekend!

1 – Asset Correlations for the period 7 – 12 October 2018, with daily returns for correlation basis. The period is selected as it is the shortest possible one for the site to generate the correlation data as at 13 October 2018.

Saturday, October 6, 2018

Tips Are Good For You

During my hobby trading days (or my “young and foolish” days), besides using very rudimentary technical analysis, I would scour the Internet and try to hear from my other trading friends and acquaintances for tips, so that I could make a quick buck from the stock market. Sometimes I make, sometimes I lost and sometimes I would just break even.

When we received a tip while trading or investing, chances are that it will be met with positivity; who would not want a money-making opportunity, right? And with this euphoric thinking, most caution would be thrown into the wind and the rush to capitalise on the tip is very likely.

I believe some of us had been through what I had described above. Of course, after a while, I had realised how dumb it was to chase after non-guaranteed tips and leads.

Having said about how bad tips were, you may be wondering by now about the choice of title of this blog post. Yes, tips are good for you. Allow me to share why this is so.

Tips Could Provide A Spark

At times we are so engrossed with our own thoughts and points of view that we failed to see things outside of our own “box”. Tips, whether intentional or not, could give that “spark” that brings you out of the said box. All you need is a tinge of open mindedness and some inquisitive nature. 

When presented with a tip, do not just think about how it can make you money, but rather think about why the tip is mentioned as such. If you go along this line of thought, you will probably see a whole new dimension that is related to the tip. From there you can then capitalise on it and start to make some money.

When the United States (U.S.) Federal Reserve was starting to raise interest rates a couple of years ago, there was talk of buying up local banks as a rising interest rate environment was profitable for them (Note: if you want to know the relationship between the U.S. interest rates and Singapore’s please read here). With this tip, not only I had looked at the three local banks, but also the three local finance companies as well, since they were in the same sector/industry.

Tips Come From Unusual Sources

Sometimes tips could just come from the most unusual sources, and a keen eye and ear are all that is needed. Being observant is key in this aspect, though you do not really need the super sleuth skills of Sherlock Holmes to achieve that.

First to start off would be the everyday things that we take granted for. What is the brand of your mobile phone? Which brand of handbags that you see most common while commuting to work? What are the companies’ names emblazoned on the sides of the rubbish trucks that ply the streets everyday? Which brand of toiletries that your family uses? Why do we mostly see a lot of MacBook users inside Starbucks?

All these questions can be developed further and in detail. Who knows, you might be able to get something out of these prospects.

Tips From Professionals

I believe you may have received emails of analyst reports and daily updates of the financial markets from your brokerages (if not, give them a ringer. They will be glad to provide you). If you have multiple brokerages, it is even better, for you will get different opinions of the same company or current market/economic situation.

While the reports are written by analysts and economists who know more of the economy and financial markets than you and me combined, the truth is very clear; no one really knows what the future holds. So now the question is, if their estimated guesses (or guesstimates) are as good as anyone’s, why do we need to read them?

The answer is simple. Typically analysts and economists are privy to information that we ordinary folk have little access to. For analysts, they are being invited by (or invite themselves to) the companies, where they could see things first hand and hear things from the horse’s mouth. For economists, they have the necessary modelling tools and techniques to come out with a guesstimate of what is to come.

With the published reports, updates and viewpoints, you can combine them with your own opinions and findings, and decide from there.


The ultimate result is to have tips from the above three sources, plus your own, to give you a (the best you could) full picture of the whole scheme of things. The only major concern is information overload, which may lead to confusion (especially with differing opinions) and/or selective bias (picking opinions which you agree with and diss the rest).

Still, as I had said time and again, we cannot tell the future, but a decision based on guesstimates stands a better chance than pure guesswork, or guesses based on groundless tips.