Saving mini investors

Currently the Hong Kong government is trying very hard to intervene and arrange for a compensation package to all minibond investors. There has been immense pressure by the Singapore minibond investors on the local authorities to step in and arrange a similar bailout. With all due respect, I personally do not think that it is a good idea for the authorities to step in.

MAS, which is the government authority in this case, has to make decisions and take actions that are consistent. If MAS has decided to intervene for the minibond investors, then why stop there? They should also round up all the retail investors who have placed their money in the internet technology unit trusts 8 years ago and fight to compensate their losses. How about those who invested in emerging market funds at the beginning of this year and are now looking at a loss of 30 – 40%? The list is never ending. Does anyone believe that there was no occurrence of “misinterpretation” by the banks 8 years ago? It takes 2 hands to clap and the whole fiasco happened due to the combination of greed on the investors’ part and “misinterpretation” on the banks part.

However, I do support the MAS stance that they will punish the banks if they are found to be guilty of understating the risks of the derivative products to the customers. It is important for MAS to send the right message that if any of the local banks compensate the investors for the losses in the minibonds, it should see it as a gesture of goodwill from the bank and not due to the pressure from MAS.

Lastly, I would like to bring up 2 golden rules for those thinking of purchasing investment products from those financial consultants.

Rule 1:
Ask for all the risks and the worst-case scenario for the product that you are interested in. Walk away if you do not understand what the financial consultant is saying.

Rule 2:
Never forget rule 1.