Yesterday, two colleagues asked me can buy or not?
This is what I told them?
- It is dumb to compare the yield between a risk-free, short-term instrument like fixed deposit and long-term capital-locking instrument like NCPS when you are very sure that you will be holding it for the next 10-20 years. Anything comparing with near zero returns will make you feel damn shiok! But why lock up your capital for 10 years when every 4-5 years a big bear will come?
- The current low interest rate 0.X% has only ONE way to go that is UP i.e. 1%, 2%, 3%, 4% or even higher. Nobody know exactly when but the way UP is definitely certain when governments start increasing rate to fight inflation.
- DBS (mother share) is currently trading at around 4% dividend yield so does DBS NCPS 4.7% still make interests-wise sense when you already have clear intention of holding it over the next 10 years.
- When interest rate rises, probably stock price of DBS NCPS 4.7% may have to fall even below par to offset the rise in interest rate to attract new buyers. That is the way that risk-reward mechanism works in the market.
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