SINGAPORE GOVERNMENT SECURITIES MARKET STARTS WELL
Singapore's government securities
market had performed well in volume terms since its launch on
May 7 but there were constraints to further growth, bankers and
dealers said.
    Lawrence Yeo, director of securities trading and
distribution for Citicorp Investment Bank (Singapore) Ltd, told
Reuters there was a shortage of non-professional corporate,
institutional and private investors trading in fixed income
securities, especially those with long term funds. The market
trades treasury bills and bonds.
    Available liquid funds were still moving into traditional
investments because share prices were rising and returns were
low on fixed income securities, Yeo said.
    He said the lack of market information and investment
education for potential investors were limiting factors.
    Referring to the securitisation of corporate debt, he said
"If the saving between a traditional bank loan and a public
offering is not great, investors prefer to take the loan
because it does not require the public disclosure of
information."
    William K.K. Wong, managing director of Indosuez Asia
(Singapore) Ltd, said institutional investors this year had
focussed on the equity market rather than bonds.
    Bankers and analysts said the new market would pave the way
for the development of corporate bond issues.
    The bankers said development of an active fixed income
securities market would encourage more private and public
companies to issue debt instruments.
    They said they hoped the risk-free government bond yield
curve would provide a benchmark for corporate bonds and other
debt instruments.
    Economists and bankers said the recent share offer by
Sembawang Maritime Ltd, which was oversubscribed 92.3 times and
which raked in a record 6.80 billion dlrs, showed the flow of
liquidity into the share market. The previous record of 1.96
billion dlrs was set in April by Avimo Singapore Ltd.
    Wong said total average daily turnover of the government
securities market had fallen sharply due to share issues.
    He said there were at most seven active participants,
mainly banks. Other financial institutions were on the
sidelines because the securities market concept was new.
    Wong said the recent revision of the minimum liquid asset
ratio to 18 pct allows banks to restructure liquid assets and
inject more long term funds into the securities market.
    One of the primary dealers, United Overseas Bank Ltd, has
an average daily turnover of over 100 mln dlrs but this could
rise to 300 mln on active option days, deputy manager Ho Kian
Fah told Reuters.
    Ho said major participants, besides the primary and
registered dealers, were mainly U.S. And U.K. Banks which
showed a willingness to quote prices.
    Loh Hoon Sun, general manager of the Overseas Union Bank
Ltd, said he forsees active trading and bidding of new
offerings in pre-issued business. Loh estimated OUB's average
turnover to be around 50 mln to 100 mln dlrs on active days.
    Dealers said a significant factor was that the t-bill and
money market rate yield gap had narrowed, making rates for
bills more competitive with those in the money market.
    Tan Mong Tong, executive director of National Discount Co
Ltd, told reporters the new securities market would enable
banks, statutory bodies, insurance companies to manage their
funds more flexibly.
    The Monetary Authority of Singapore (MAS) plans to issue
eight to 10.5 billion dlrs of taxable instruments in the first
year and a gross issue of 35 billion dlrs over five years.
    The first issue of 300 mln dlrs worth of T-bills by the MAS
was 1.9 times subscribed while the first issue of 500 mln dlrs
worth of five-year bonds was three times oversubscribed. The
recent issue of 300 mln dlrs of two-year bonds received 1.17
billion dlrs in applications.
    The new securities market operated by MAS on an electronic
book entry system will provide new investment outlets intended
to develop Singapore's capital market, bankers said.
    But the market is new and long term success and expansion
will depend on how the MAS and the primary and registered
dealers stimulate activity, the bankers and analysts said.
    They said it was necessary to promote liquidity because
investors did not negotiate frequently enough and tended to
hold on to their investments.
    They advocated the establishment of a market makers
association to help investors understand the market and its
instruments as a lack of speculative activity limits market
turnover and supply.
 REUTER
