What are the benefits of bonds?

Low-risk investment This is especially true for government bonds and high-grade corporate bonds Regular cash payout Through coupon payments made annually, semi-annually or quarterly Potentially higher interest rates Compared to fixed deposit rates Capital appreciation opportunity In addition to regular cash payouts Investment diversification Balance out higher-risk asset classes in portfolio

How can I invest in bonds through Standard Chartered?

While our Investment Services have a variety of bond funds, we have gone even further and now offer you the opportunity to access different types of bonds in the market. Standard Chartered allows you the freedom to select the bonds of your choice from our comprehensive range offered, to help diversify your investment portfolio.

What does buying a bond in the secondary market mean?

Aside from purchasing new-issue bonds from the issuer, you can also purchase bonds that are already in the market. This is known as purchasing bonds from the secondary market. The price you will be required to pay would be the accrued interest on the bond as well as its market value. Example: Investor A buys a bond in the primary market with a face value of RM1,000 and a coupon of 5%. After 90 days, Investor A sells the bond to Investor B at the market price of RM950. Investor B would have to pay: Market value of bond + accrued interest of bond over 90 days = RM950 + (RM1,000 x 5% x 90/365) = RM950 + RM12.33 = RM962.33 is the amount Investor B pays Investor A when he purchases the bond from the secondary market

What to look out for when choosing your bond?

Credit risk or default risk You should select a bond that is issued by a credible issuer to ensure that full and timely repayments can be made to you. If the bond issuer is unable to make interest or principal payments when due, as per the bond agreement, the issuer is said to be in default, and the investors may not recover their full investment capital. Interest rate risk Bond prices have the tendency to move inversely with interest rates. This may have an effect on your investment, due to the rise and fall of the bond price, should you decide to sell the bond before its maturity. Liquidity risk Each and every bond comes with a maturity date. You will need to be prepared to hold the bond till maturity. However, should you need to liquidate your investment at short notice you may experience difficulty in finding a buyer and may therefore have to sell at an unfavourable price. Currency risk With global bonds, you need to be aware of your exposure to currency risk. This is the possibility that the value of the investment may be adversely affected by currency fluctuation movements through a devaluation of the base currency versus the reference currency, resulting in potential losses.

Malaysia Ringgit Bonds | Foreign Currency Bonds

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Proceed

Grow your wealth and diversify your portfolio with Standard Chartered Bond Investment

Low-risk investments

Hedge your risk with bonds, especially government and high-grade corporate bonds.

Regular cash payouts

Enjoy regular cash payouts through coupon payments annually, semi-annually or quarterly.

Capital appreciation

Bonds present significant opportunities for capital appreciation in addition to regular cash payouts.

Diversify your portfolio

Diversify your portfolio and balance out higher-risk asset classes by including investing in bonds.

Additional information

Diversifying your Portfolio with Bonds

Experienced investors know the importance of having a diversified portfolio to grow their wealth. Equities, property, a variety of unit trust funds, cash as well as bonds, should form core elements of your financial portfolio.

Due to the general unavailability of bonds to the ordinary retail investor and the high entry-level investment required, the avenue for investors to bonds has traditionally been via unit trust funds.

Standard Chartered offers you greater access to bonds in multiple currencies at a minimum amount of US$50,000 or its equivalent*.

* US$50,000 applies to foreign currency bonds only. A minimum of RM250,000 will be required for local currency bonds or RM denominated bonds.

The basics on bonds

When companies and governments need to raise money for various reasons, from infrastructure to expansion, they issue bonds which can run into hundreds of million in Ringgit Malaysia and foreign currencies. Institutions and investors then lend money by purchasing the bonds in return for interest, much like how a loan works. These bonds can then be bought and sold on the secondary market.

Basic bond terminology
Issuer	The party seeking to raise funds
Investor	The party lending funds to the issuer
Coupon	The interest rate paid to the investor
Yield	The return on your bond investment
Face value	The amount borrowed stated on the bond
Trading at a discount	The bond price is lower than its face value
Annual discount	The total yearly amount at which the bond price is trading lower than the face value
Tenure	The length of time till the bond maturity date
Maturity date	The date on which the Issuer has to repay the face value to the investor

The pricing of a bond

Regardless of the face value of the bond or the price at which it was issued, the price of a bond on the secondary market may rise or fall, depending on various factors. This bond price is usually quoted as a percentage of the face value. There is an inverse relationship between market interest rates and a bond’s price: as a general rule, when market interest rates rise, the prices of existing bonds decline, and when the market interest rates decline, prices of existing bonds increase. This relationship is one of the factors that explains why a bond can trade at a premium price (above face value), at face value, or at a discount (below face value).

	Face value	Current market value	Price of bond described as a % of the face value
Bond at discount	RM100	RM98	“at 98”
Bond at par	RM100	RM100	“at par”
Bond at premium	RM100	RM102	“at 102”

Calculating the yield on a bond

Assume the market value of a RM100 bond with 5% p.a. coupon is at RM102. The bond is therefore said to be at 102. Let us now calculate the yield on this bond.

Annual coupon on the bond = 5% x RM100 = RM5
Yield on bond = RM5 / RM102 x 100% = 4.90%

The above computation of yield is true if the bond had a 1 year tenure. But what if the bond had a 10-year tenure? This involves a few additional simple steps.

Step	Description	Calculation
1	Calculate the annual premium you are paying = Premium paid on bond / tenure years	RM2 / 10 years = RM0.20
2	Annual premium expressed as a percentage of market value = Annual premium / market value of bond x 100%	RM0.20 / RM102 x 100% = 0.20%
3	Deduct the annual premium from the annual bond yield = Yield on bond – annual premium on bond	4.90% – 0.20% = 4.70% is the annual yield on the 10 year bond

If the bond was trading at a discount, then for step 3, you would need to add the annual discount to the coupon yield
While the above example may not provide a precise answer due to compounding effects over the tenure of a bond, it provides an acceptably good indication of the returns or yield you can expect to earn

The risks

Before investing, you need to understand there are risks involved when it comes to investing into bonds. Some of the main risks in investing in bonds are:

Risk	Details
Interest rates risk	Bonds usually pay a fixed coupon, this means that a rise in interest rates generally result in bond prices falling conversely, when rates decline, bond prices rise
Credit risk or default risk:	This is the risk that a bond issuer will be unable to make interest or principal payments when they are due
Currency risk (for investment in foreign currency bonds)	Foreign currency investments are subject to exchange rate fluctuations which may affect, unfavourably or favourably, the effective return on the bond
Liquidity risk	Investors may have difficulty finding a buyer when they want to sell and may be forced to sell at a significant discount to market value. Also, most bonds are subject to a minimum transaction threshold. If your investment is less than that threshold, you will not be able to sell until and unless there are enough other investors who also want to sell
This Investment is NOT protected by Perbadanan Insurans Deposit Malaysia.

What are the benefits of bonds?

Low-risk investment
This is especially true for government bonds and high-grade corporate bonds

Regular cash payout
Through coupon payments made annually, semi-annually or quarterly

Potentially higher interest rates
Compared to fixed deposit rates

Capital appreciation opportunity
In addition to regular cash payouts

Investment diversification
Balance out higher-risk asset classes in portfolio
How can I invest in bonds through Standard Chartered?

While our Investment Services have a variety of bond funds, we have gone even further and now offer you the opportunity to access different types of bonds in the market.

Standard Chartered allows you the freedom to select the bonds of your choice from our comprehensive range offered, to help diversify your investment portfolio.
What does buying a bond in the secondary market mean?

Aside from purchasing new-issue bonds from the issuer, you can also purchase bonds that are already in the market. This is known as purchasing bonds from the secondary market. The price you will be required to pay would be the accrued interest on the bond as well as its market value.

Example:
Investor A buys a bond in the primary market with a face value of RM1,000 and a coupon of 5%. After 90 days, Investor A sells the bond to Investor B at the market price of RM950.

Investor B would have to pay:
Market value of bond + accrued interest of bond over 90 days
= RM950 + (RM1,000 x 5% x 90/365)
= RM950 + RM12.33
= RM962.33 is the amount Investor B pays Investor A when he purchases the bond from the secondary market

What types of bonds are on offer?

Government securities	They include Malaysian Government Securities (MGS) and Malaysian Treasury Bills issued by the Malaysian Government to raise funds
Zero-coupon bonds	These bonds do not have coupon payouts but are instead sold at a discounted value, with the face value payable at maturity date
Corporate bonds	These are debt securities issued by corporations and offer coupon payouts with a fixed maturity date
Floating-rate notes	These bonds have a variable coupon, usually dependent on a money market reference rate e.g. LIBOR (London Inter-Bank Offered Rate), plus a fixed spread
Commercial papers	These unsecured money market securities are usually short term in nature and issued by corporations with excellent debt ratings
Certificate of deposit	Issued by banks or financial institutions that is interest-bearing and short term in nature
Subordinated bonds	These typically offer a higher rate of return as they have lower priority compared to other bonds in the case of liquidation or bankruptcy of the corporation
Convertible bonds	This hybrid security has debt and equity-like features and can be converted into equity in the issuing company at an agreed upon price
Islamic debt securities	These debt securities are corporate bonds that are Syariah-compliant
Inflation indexed / Protected securities	The principal amounts of these bonds are indexed to inflation, thereby reducing the inflation risk of the investment

What to look out for when choosing your bond?

Credit risk or default risk
You should select a bond that is issued by a credible issuer to ensure that full and timely repayments can be made to you. If the bond issuer is unable to make interest or principal payments when due, as per the bond agreement, the issuer is said to be in default, and the investors may not recover their full investment capital.

Interest rate risk
Bond prices have the tendency to move inversely with interest rates. This may have an effect on your investment, due to the rise and fall of the bond price, should you decide to sell the bond before its maturity.

Liquidity risk
Each and every bond comes with a maturity date. You will need to be prepared to hold the bond till maturity. However, should you need to liquidate your investment at short notice you may experience difficulty in finding a buyer and may therefore have to sell at an unfavourable price.

Currency risk
With global bonds, you need to be aware of your exposure to currency risk. This is the possibility that the value of the investment may be adversely affected by currency fluctuation movements through a devaluation of the base currency versus the reference currency, resulting in potential losses.

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