Vested in OCBC using CPFIS in 2015 and somehow almost forgot about this investment only when last year due to the Covid-19 pandemic that I realized I have this investment when organizing all the investment portfolios. Since then, made a decision to strategically switched out OCBC with SGX.
The tactical switch was finally completed after months in selling (OCBC) and buying (SGX). OCBC was vested in 2015 at $10.40/share. Along the way there was an addition coupled with collecting scrip as dividend. As a result of that, the eventual holding price was $9.183/share before the tactical switch. The tactical switch from OCBC to SGX though saw a 8.25% reduction in the number of share, the vested capital was able to reduce by 9.65%. As such, the holding price of the SGX after the tactical switch was $9.0434/share.
The following reasons were being considered to make the strategic switch.
1. Stability of the company
Well don't get me wrong, OCBC is not a shaky coporation that can go under the belly easily in time of crisis. The stability factor is more on the "too big to fall" type. No matter how financially strong OCBC is, there will be times especially a big financial crisis like the scale of the 2008 GFC that could impact its cash flow with default loans, mortgages, etc. That was why during the 2008 GFC banks were doing right issue, share placement, offering perferrential share to investors to beef up their cash holdings. Banks can fall too like Lehman Brothers went bankrupt, Merrill Lynch being acquired by BofA and so on. Similarly, Singapore banks will have not exception. The financial risk factor between SGX and OCBC is drastically different. For sure during a financial crisis, bank revenue and profit will take a severe hit but that cannot be the same for SGX. SGX gets its revenue and profit from stock market activity. Though it will be a bear market in time of financial crisis, that might not have a direct relation to the stock market activities. As long as there is volatility in the stock market, it will attract investors and traders to come in to provide that required revenue and profit. A Singapore bank can get into trouble and in turn being absored or acquired by another bank resulting in short-term damage but a fall in SGX (getting into administration), the one and only stock exchange in the country, is a very bad reputation for Singapore as a financial hub.
2. Scrip dividdend
OCBC used to have that and that was how I managed to increase the holding by 9% throughout the investment periods. SGX is intenting to start one and seeking approval from shareholders in next month AGM. By strategically switching to SGX allows me to continue the scrip dividend scheme to increase the holding.
