In praise of Blind Faith

3 members in our family invested in Hyflux perpectuals, my husband, my daughter (upon my bad advice) and myself. Though in the same family sharing information, misbeliefs and non 'information' we behave very differently when come to money investment.

Hyflux's CEO used to be the country's poster girl whom I admired partly because we share the same surname. From starting a company selling water filters and treatment chemicals she had grown Hyflux into an internationally branded water treatment company listed on Singapore Exchange and lauded by the government for building the nation's biggest combined desalination and power plant in 2013. The company had also expanded to build facilities in Oman and Saudi Arabia.

Temasek invested in the company in the early 2000's but exited in 2006. However most retail investors are not aware of the exit and went in by a leap of faith. Due to a combination of high leverage, crumbling electricity prices and contract cancellation cum delayed payments in Middle East, Hyflux is now on the brink of insolvency. This left investors bewildered as to how such a respectable company can fall so fast while white knights appear and disappear to save it.

As I was the one who recommended Hyflux perps to my daughter and knowing that she is highly risk adverse, I made her sell the securities when I read the first wave of caution by analysts. At such she suffered 3 % capital loss which was more than recovered from the dividends collected. Myself I hanged on for a while believing that the government would not let this Singapore brand come to ruins. Fortunately my treasury training taught me to cut loss and I sold two thirds of my Hyflux investment at 23% capital loss but held on to 10 lots still maintaining my faith in the country's poster girl. At the same time I advised my husband to do likewise with his 30 lots. I had to help him reason out that the dividend collected over the years would contra against the capital erosion such that the loss is less than 10% net. However my husband, being someone who can never bear losses, did not heed my advice. Now he sighs when reading about white knights that come and go.

In a surprising move, the latest potential white knight is considering some S$400m capital injection while offering a better deal for retail perpectual security investors, (better than what perp investors are legally entitled as they actually rank almost last next to shareholders). Apparently the white knight makes a special offer to these junior creditors instead of senior creditors because the former "took a passive blind faith risk" while the later "took an active business risk with ringside view".

When I read this I congratulated my husband because he stands a chance to recover his money due to his 'passive blind faith'. I too stand a chance to recover my balance money despite my  'passive blind faith' and unforgivable laziness because I am financially trained and had failed to be diligent enough to do my homework before investing.