18 Apr 2019
Realised Singapore doesn't have enforced credit rating system like Moodys or S&P - probably led to the Hyflux nonsense do you think? Like less than 50% are rated !!?
How can we protect ourselves against this...I don't want to lose more money in this kind of situation again...
Interesting point to note- in the '08 Financial Crisis, a similar argument was made as to whether Credit Rating Agencies should be liable since they gave Credit Default Obligations triple A rating which should be reserved only for the safest securities.
This included over three trillion dollars of loans to homebuyers with bad credit and undocumented incomes through 2007. Subsequently, Hundreds of billions of dollars' worth of these triple-A securities were downgraded to "junk" status by 2010.
In short, the Credit Rating System is not foolproof as well.
Also here's a pretty good article imo https://www.theedgesingapore.com/portfolio/total-compliance-financial-reporting-was-it-misleading
"Make no mistake: Hyflux’s audited and unqualified financial statements are in compliance of all prevailing accounting standards. The use of perpetual securities is allowed and gaining in popularity. But I believe there is a strong case here that they must be better represented in financial statements."
Would a Credit Rating System really have made a difference? I doubt so.
I don;t think its fair to say that the whole Hyflux saga was due to the fact that Singapore doesn't enforce credit rating system and like you mentioned, less than 50% are rated but yet the amount of defaults in Singapore is very low. While many may argue that the lack of credit rating systems compromise the due diligence process, many of the bond holders in Singapore are actually accredited investors who should have their due diligence processes in place.
I guess to not lose money in the future, perhaps you can invest in companies/bonds that are rated.
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