Photographer: SeongJoon Cho/Bloomberg

Singapore Regulator Offers Grants to Spur Local Bond Ratings

  • MAS says it would like to see more rated Singapore bonds
  • Ratings could lead to ‘better risk assessment’: Lombard Odier

The Monetary Authority of Singapore will start offering grants to offset costs incurred by issuers seeking credit ratings for Singapore dollar-denominated bonds, according to a central bank statement Friday.

“MAS would like to see a higher share of rated issuances in the SGD bond market,” the regulator said, referring to Singapore dollar notes. “Currently only about half of the outstanding volume of SGD bonds are rated.”

Greater availability of credit ratings in the domestic bond market would improve market transparency, according to MAS. It added that many regular issuers in the local debt market are unrated and rely mainly on the same pool of domestic investors. The move comes as the Singapore bond market has suffered an unprecedented S$1.35 billion ($980 million) of defaults since November 2015 amid a slump in oil prices, with some individual investors having suffered losses.

“It is not usual for a central bank to subsidize the cost of company ratings,” said Annisa Lee, Hong Kong-based head of Asia ex-Japan flow credit analysis at Nomura International (Hong Kong) Ltd. “Perhaps the government wants to give more credit protection to Singapore dollar bond investors, especially retail investors.”

Qualifying issuers who obtain credit ratings from an international rating firm will be able to claim as much as 100 percent of their credit rating expenses, subject to a funding cap of S$400,000 per issuer. The grant is open to both foreign and domestic issuers and ratings will allow issuers to attract a more diverse investor base, including international institutional investors, the regulator said.

“If adopted by issuers, this could lead to better risk assessment for the investment community as rating agencies typically have better access to issuers on a regular basis than most investors do,” said Dhiraj Bajaj, portfolio manager at Lombard Odier in Singapore. It could allow the local bond market to grow in sophistication and depth similar to the Asian U.S. dollar bond market, he added.

Alexander Zeeh, chief executive officer at S.E.A. Asset Management Pte, said that more rated bonds would create transparency in a market that “appears opaque to outside investors.”

— With assistance by Sebastian Tong

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