Singapore’s announcement that its statutory boards and government companies will issue bonds to fund infrastructure projects will benefit insurers, an expert has said.
Finance Minister Heng Swee Keat revealed in his budget speech that the government is looking to provide guarantees for long-term borrowings made by statutory boards and government-owned companies to fund the building of critical infrastructure.
According to Heng, this method can help lower financing costs for the Singaporean government, and ensures that it will not draw directly from its reserves to fund the infrastructure projects. It also spreads costs over a longer period of time and stimulates the country’s bond market, he said.
Meanwhile, Samuel Chan, head of capital markets for Standard Chartered Bank in Singapore, told the Business Times that other Asian economies, such as Japan, China, and South Korea have also employed similar schemes to fund their infrastructure undertakings.
Chan said that due to infrastructure financing having a long-term nature, yields can be quite a lot higher and will benefit institutional investors, such as insurance companies, as these match their long-term liabilities.
Clifford Lee, DBS Bank’s head of fixed incomes, added that infrastructure bonds are a good fit with insurers and other bond investors due to their compatible cash-flow profiles.