CapitaMalls Asia (CMA) Bond Issue

In September last year, Singapore Airlines (SIA) became the first corporation to issue their bonds to retail investors and the bonds were then traded on the Singapore Exchange. CapitaMalls Asia (CMA) became the second to follow SIA’s footsteps.

CapitaMalls Asia Treasury Limited (Issuer) is offering up to S$200 million bonds for public subscription comprising (a) up to S$100 million of 1.00 per cent interest bonds due one year after in 2012 (1-year bonds) (b) up to S$100 million of 2.15 per cent interest bonds due three years after in 2014 (3-year bonds). The Issuer has the right to cancel specific offering or vary the final allocation of amounts between 1-year bonds and 3-year bonds. The issue price is S$1 per S$1 in principal amount of the bonds. Minimum amount for application is S$2,000 in principal amount with higher amounts in multiples of S$1,000. CPF and SRS funds cannot be used for this application.

Closing date for the public offer via electronic application is on Monday 17 January at noon.

The 1-year bonds pay 1.00 per cent interest per year and the 3-year bonds pay 2.15 per cent per year. This contrasts with SIA 5-year bonds paying 2.15 per cent interest per year. In some sense, investors in SIA bonds are stuck with interest rate of 2.15 per cent over a longer period of 5 years instead of 3 years for CMA bonds. Should Singapore interest rate rises in next 1-5 years, you will be better off holding onto a short-dated bonds than a long-dated bonds. Prices of bonds will decline as interest rate rises. Prices can also decline when there is a lack of demand for the bonds traded on the Singapore Exchange. When this happens, investors can pick up bonds below S$1, which is the principal amount. As an example, SIA bonds had traded at $0.994 before.

Besides the price risk, there are other risks involved in investing in bonds. I have written some of them in my earlier post on SIA bonds.

Copyright © 2011, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.


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