Sunday, May 23, 2010

Sukuk 1 Malaysia (S1M) with 5% per annum profits

Great news to all Malaysians! The Ministry of Finance will be issuing Sukuk 1 Malaysia (S1M) 2010) under Financial Funding Act 1983 with a total amount of 3 billion on 21 June 2010. Bank Negara Malaysia (BNM) had been appointed to issue the S1M on behalf of the Ministry of Finance.

Let’s have a look to the key features of this plan as issued by Ministry of Finance on 10 May 2010.


This S1M is sort of like fixed deposit but this is a Government savings bond with guaranteed 5% per annum fixed profits for maturity period of 3 years. The current FD rates among local banks for 12 months (1 year) is about 2.8% whereas for 36 months (3 years) is about 3%. Thus, the 5% return is definitely attractive to the investors.

The profit payment is paid on a quarterly basis by the Government to the respective agent banks and then to the S1M 2010 holders' deposit account within one working day after the profit payment date. For example, if the profit payment date is on 21 December 2010, the agent bank will credit the quarterly profit payment on 22 December 2010. The schedule of payment is as below:


Another characteristic of this S1M 2010 is the resealeable feature which is not found in FD. The minimum sell or purchase per investor is RM 100 (in multiple of RM 100) and there is no maximum investment as long as there is availability of the allocation. The pricing follows daily prices based on principal at par plus accrued profit and additional administrative cost of 0.1% of the amount purchased to the agent banks. Do you understand this term? I think only those who study economics or works in banks will understand that. Let's see the below example

Example 1.
If I sell RM10,000 of S1M 2010 on 2 October 2010 which is 11 days after the first quarter profit payment date, the amount received will be as follow:
  • Profit payment = RM 10000 x 5%/4 x 11/91 = RM 15.10
  • Amount received = RM 10000 + RM 15.10 = RM 10015.10
Example 2.
If I buy RM10,000 of S1M 2010 on 2 October 2010 which is 11 days after the first quarter profit payment date, the buying prices will be as follow:
  • Profit payment = RM 10000 + 5%/4 x 11/91 = RM 15.10
  • Buying price = RM 10000 + RM 15.10 = RM 10015.10
  • Additional 0.1% additional costs: 0.1% x RM 10000 = RM 10
  • Total amount to be paid = RM 10015.10 + RM 10 = RM 10025.10 
This feature allows the S1M holders to sell their sukuk at anytime with no surrender charge when you wish to terminate the plan. Apart from that, the profits gained are exempted from tax. 

Sounds attractive? So, where can you purchase Sukuk 1 Malaysia? The lists of banks are as follow:
  1. Affin Bank Berhad
  2. Alliance Bank Malaysia Berhad
  3. AmBank (M) Berhad
  4. Bangkok Bank Berhad
  5. CIMB Bank Berhad
  6. Citibank Berhad
  7. EON Bank Berhad
  8. Hong Leong Bank Berhad
  9. HSBC Bank Malaysia Berhad
  10. Malayan Banking Berhad
  11. OCBC Bank (Malaysia) Berhad
  12. Public Bank Berhad
  13. RHB Bank Berhad
  14. Standard Chartered Bank Malaysia Berhad
  15. The Bank of Nova Scotia Berhad
  16. United Overseas Bank (Malaysia) Bhd
  17. Alliance Islamic Bank Berhad
  18. Affin Islamic Bank Berhad
  19. AmIslamic Bank Berhad
  20. Bank Islam Malaysia Berhad
  21. Bank Muamalat Malaysia Berhad
  22. EON Capital Islamic Bank Berhad
  23. Kuwait Finance House (Malaysia) Berhad
  24. Hong Leong Islamic Bank Berhad
  25. Maybank Islamic Berhad
  26. OCBC Al-Amin Bank Berhad
  27. Public Islamic Bank Berhad
  28. Standard Chartered Saadiq Berhad
  29. Bank Kerjasama Rakyat Malaysia Berhad
  30. Bank Simpanan Nasional
  31. Agrobank

The minimum purchase is RM 1000 (in multiple of RM 100) and the maximum purchase is RM 50,000. The subscription period is from 20 May 2010 to 9 June 2010.  All you need to do is to bring your IC and go to any of the listed banks above. You may pay either by cash or debit through your existing deposit account at the agent bank. No charges will be imposed.

After your application has been processed, you will be given a customer application slip as below:


However, this slip doesn't guarantee that you had successfully purchased the S1M. Sounds confusing? During this subscription period, you may attempt to purchase up to RM 50,000. The issuance date for S1M 2010 will be on 21 June 2010. Bank Negara will send a confirmation letter on how much you had successfully subscribed or you may check at your agent bank on 21 June 2010. 

During registration, the bank may either deduct the total amount subscribed from your existing savings account (Method A), earmark your account (Method B) or received payment by cash (Method C). If let say you subscribed RM 10,000 but the allowed subscription is only RM 5000, the bank will on 21 June 2010  credited back extra RM 5000 to your savings account (Method A), deduct RM 5000 from your savings account (Method B) or credit back extra RM 5000 to your registered savings account (Method C). Thus, it is advisable to update your savings book on 21 June 2010 onwards.

The logical reason behind these different subscription period and issuance date is to ensure all Malaysian have the chance to enjoy this profits benefit. I used this example to explain to my mother. (I hope my understanding is correct)
  1. The Government allocates only 100 units and each unit cost RM 1.
  2. There are 100 subscribers and some of them purchase RM 20, RM 50 or even RM 100. 
  3. The Government will try to allocate the fund to ensure all the 100 subscribers will able to purchase the fund. Thus, the only allowed subscription per investors for this example is RM 1 per investors.
How about the responses? The previous Sukuk Simpanan Rakyat 2009 (exactly same features) with 5 billions fund (with 2.5 billion in 2 different sales period) had received overwhelming response. The second sales period was sold out in 9 days.

As contrast to Sukuk 1 Malaysia, it is very surprise to learn that the subscription so far received a poor response. According to the Star dated 21 May 2010, response has been lukewarm to S1M 2010 according to a local banks poll. A few banks claimed that they only received 10 depositors while there is one bank which claimed they received none. On average, the depositors are aged between 40-50 years old. I myself had asked the staff at Hong Leong Bank and was told that the response was not that good as compared to the previous sukuk.

As for me, it was no surprise as there is little promotion or the public may generally lack knowledge on this government savings bond. I did not know about it until a friend working in a bank told me on this. As compared to ASM, the profits are of course lower (2008-7.8%, 2009-6.4%) but one should noted that the allocation for ASM is limited (the previous new allocation was limited to RM 20,000 purchase). During subscription period, one need to queue up as early as 6.30 am to purchase ASM but you can simply walk in at anytime to buy sukuk during the subscription period. In addition, there are wide choices for agent banks for S1M compared to limited few banks & post office for ASM. Thus, I personally felt that this is a must investment in additional to your ASM. As compared to Amanah Saham 1 Malaysia, the yet to be declared dividend was predicted to be approximately 4% but of course as an investor, we hope the figure will goes beyond that. Let's cross finger and hope the AS1M dividend will be as high up to 6%.

So, wait no more. If you have additional money and intended to place it in fixed deposit, I would suggest you to purchase this Sukuk 1 Malaysia. Hurry to any of the agent banks and subscribe before or on 9 June 2010.  The earlier, the better.

Happy investing!~ 

29 comments:

kenwooi said...

wow.. this is so complicated =/

alantanblog said...

If you are young, don't waste your time investing in Sukuk 1Malaysia 2010.

You can get better return else where i.e REIT, solid blue chip stocks

Nana Lana said...

i shall find a consultant soon i guess. =)

Anonymous said...

Depends on how you look at it. cast your net cause ocean has alot of opportunity.

Xjion89 said...

hahaha, u r taking finance gah?~~~
a good investment?^^~~~

KwOnG FeI said...

@kenwooi: haha.. try learn step by step

@alantanblog: yea..you're right but i am too young now that I don't have the capital.. thus, will be stick to FD alike investment plan.

@Nana: haha.. good~

@Anonymous: exactly.. depends on one needs and wants .. thr r too many out thr.. if want a safe and ok earning, then go for sukuk

@xjion89: haha.. do i look like finance ppl? Hmm i would say if ur capital nt high u can go for it.. eg putting 50K in sukuk and puyttng 50 K in FD..,. you earn way better in sukuk

kampunginvestor said...

A very well detailed explanation. I agree with Alan Tan that if we are young we shouldn't waste time on such investment tools that gives low returns. ^^

We should be more Gung Ho but if you don't know what to do yet with your extra money or don't have any plans for further investments, then just park your money in there is a wiser step rather then putting it into the FD.

Just my 2cents! ^^

KwOnG FeI said...

@kampunginvestor: yup.. agreed. but i am not a working person now.. still considered a student so left with not much choices.

if u happen to drop by again, how about foreign FD? any ideas? my friend is encouraging me to buy that but of course in near future not nw..

Anonymous said...

Kwong Fei,

Is the 5% returns and capital 100% fully guranteed and protected?

I read the prospectus of Amnah Saham 1Malaysia and if my memory is correct, there is no capital and divident gurantee.

Lastly, there is no prospectus from treasury or Bank Negara on Sukuk 1Malaysia.

Pls shed some light.

KwOnG FeI said...

hie anonymous,

1. The 5% returns is fully guaranteed. Though in the information print out did not state the word capital guaranteed, it have one statement to justify the capital guaranteed.

*At maturity (on 21 June 2013), the final proceeds (S1M 2010 holding plus the last profit payment) will be automatically credited into the S1M 2010 holder's deposit account maintained with the agent bank.*

2. You are right. AS1M is not capital guaranteed. Should the investment failed, you may get negative income. However, think of the bright side. So far, none to my knowledge that ASNB investment had failed to give returns to the investors. For the dividends, it did not state guaranteed too. However, the ASNB already predicted dividend at least 3.7 % and above. Perhaps, for more clarification, check out my detailed post at http://kwongfeimind.blogspot.com/2009/08/camping-for-amanah-saham-1-malaysia-5.html.

3. Actually, you can get more information from BNM at http://www.bnm.gov.my/index.php?ch=255&pg=816&ac=837. This is the print out which was exactly the same as those distributed to local banks. (my friend works in a bank) Actually, I would say the information or shall I considered it prospectus is way better than ASNB. For ASNB investment, such information are not available in the website but only distributed to the local banks. At some places, you may get a simplified print out of the prospectus whereas at some places, you get none and have no choice to only get info from ASNB hotline. Perhaps, i would say lack of promotion and publicity that public do not aware of the website as compared to ASNB website.

Anonymous said...

What you have said about S1M is correct as I have read from the govt website.

Nowadays we believe in black & white only and not what is written in website as it involves alot of money, in this case 3 billions of public fund. Look what happened in America and Grecce. In America the investing public got conned by the professional fund managers. Many of my friends cancelled their FD to buy S1M. They lost the interests and hopefully they get the 5% and their capital guaranteed.

I have invested as well and now I'm also a little worried as our govt keep on spending money that they dont seem to have. They borrow here and spend there. Sometime is even worse. They spent on unneccessary. Have you heard about RM8 billions on 256 new armoured vechicles for MINDEF as reported by Tony Pua? Each of these non combat vehicles is priced at RM31.1 million whereas the best in class M1Abrams M1A2 deployed in Iraq cost only US6.1 million or RM19.7 million.

I trully worried as we have worked our entire life and we just cannot afford to take any risk with our life savings.

Anyway, nice talking to you.
- Mr S.H.Tan

Schubert Tan said...

Oh btw, my family & I have just tried your recommended makan place in Kuchai i.e Ah Soon Fish Head Mee & we as a family agrees it is really nice but the ice lemon tea is "out" a little.

Will explore your other recommendation and perhaps leave a line or two in the future.

Mr S.H.Tan

Anonymous said...

ever wonder why there is more and more this kind of...bond from Gov?
Want us to safe more?Well, maybe...but I personally don't think that is the main reason.
I think is because they dont have money.
Remember we had a few diff types of Amanah Saham bonds and some...others sukuk from Gov?Well, the way I look at it, is they need to create more and more this kind of bond to pay back the so called "return investment (whether is 5% or x%)" to those older sukuk.
So the more people getting this, the more money those 'top' people can get some* money out of it, at the same time, it pay back some of the older investor on older bonds. What happen when lesser people invest on the latest bond? hehe, that's where more Gov bond will be created and...those so called subsidy will be remove lor (hike in toll, gas, elec, etc, insert_others_here).
Then shall we support it? Hmm, depends on ... each of us...what we think lor. :)
Cheers.

KwOnG FeI said...

@MR S. H. Tan:

The 5% confirmed guaranteed. No worry. Capital should be guaranteed too just that the terms capital guaranteed required some specifications which I had written in AS1M post.

I am not aware about the 8 Billion thingy but I know the government spent a lot in buying armors, planes, submarine etc.

@ anonymous as well:

It is true and very obvious why these SUKUK is issued. For example, last year itself, PM Najib have announced the economic boost or injection (i forgot the correct term) of billions of ringgit. Where does this money come from when the allocation in the yearly nation's budget is fully utilised?

Now the next examples are just my opinions (without evidence). Where does the BN governemnt find the money for the byelection namely Hulu Selangor and Sibu. Huge amount of money are promised when as we know the government lack of fund. So. 'probably' these sukuk is to channelled to there.

I also believed the investment from ASM for example do give a higher return from reported. As what @anonymous said, perhaps, the addition return were funded to give the 5% sukuk.

It is also true that the more such funds or investment are created, it means the country need money because of too much spending unnecessary.

Well, as a normal citizen, what can we do? We know d fact but that is the fact that cannot be changed.

Thus, whatever it is, seem they are offering good investment returns to us, why think more. Just invest 'la'.

I agreed that some may not showing support knowing the true fact. However, in my views, if you dun invest, there will be many people out thr will.

So, support or not support is truly depends on your judgement.

As for me , I dun really care much. So long they give back good return and my capital, then OK~

Cheers~

@Mr S. H. Tan: yea that place fish head mee is awesome!

To my surprise, I thought the ice lemon tea on the day I visited was because some imperfection in making it only on dat day. When you mentioned it, it seems to suggest that we should not order the ice lemont ea next time. HAHAH.. if not mistaken, it is too sour.

Anonymous said...

The ice lemon tea is not too sour but it taste like lemon add into our normal coffeeshop ice tea ( Suet Char that cost 40 cents/glass). They should use better quality tea.

OK. I recommend you and your friends to try a Kopitiam that sells nice white coffee hot($2.00)/cold($2.30), nice roti bakar butter&kaya($2.00) and delicious Udon mee sotong($6.90 or $7.90). Cannot remember the price cos too delicious to eat!!


The name of the shop is Kopitiam, located directly opposite Tesco Puchong, on Jalan Bandar 1 of Pusat Bandar Puchong and next to a seven eleven shop. Try and tell me if I'm correct. Its cheap plus tasty. Comes with 5% service tax.

Mr S.H.Tan

Schubert Tan said...

Oh I have forgotten to ask you all to try their ice lemon tea that I and my family consider first class ($3.50). Very very syok lah. The tea leaf is the English breakfast tea known as Sabah tea. Can get from our hypermarket but a little bit more costly than local brand.

Mr S.H.Tan

minasan said...

hey..have u got your confirmation letter? i haven't receive mine..but bank account is not deposited back my money.. :(

Anonymous said...

i also haven't leh so worry about it,so sian.

KwOnG FeI said...

hey readers..
i also din get the confirmation letter..
my friend told me we need to check with the agent bank we went to purchase..
ar.. CRAP..
they told us Bank Negara going to issue us letter and now is different case..
yet to check.. need time to go to the bank

Anonymous said...

I have received the letter from the agent bank yesterday..Due to not much ppl subscribe S1M, they actually extend the subscription till 15 Jun..I subsribe on 14 Jun, 50k, got allocated full amount..Aiyoh, now rakyat no money already..All take the money either buy hse or already deposit in Amanah Saham/Sukuk..

KwOnG FeI said...

@anonymous: thanks for d info..
i am yet to go to the bank and check..
but my bank statement no addition of money so i think i will be able to get full amount since the subscription is less than expected..

oh, they extended to 15 Jun, maybe the letter get delayed becoz of this..
actually, my friend working in bank told me that at end of Jun, the bank are very busy because they need to close or deal with a lot of accounts half year

so,now will be waiting for d letter...

KwOnG FeI said...

my mum who purchased thru Hong Leong Bank had just received the letter maybe around 12 July but the date of the letter is 1 july confirming the full amount of subscription.

i' waiting mine from Maybank..

whow said...

I also purchased thru HLBB but still not received yet....:(

KwOnG FeI said...

Finally, I received the confirmation letter from Maybank ..
about one month from the date they promised to send to us..

Anonymous said...

i wonder if there is any changes to the govt ie. opposition takes over the centre govt. will it has any effects on these kind of sukuk ? will it still guarantee on the capital invested ?

akagugo said...

Greetings Mr Kwong Fei!
From what I gather from this post, is that instead of raising money (is it for funding its projects?) by taxing the people heavily, the government asks the same people to contribute to their own country's development, and motivating them by waiving taxes on their profits derived from sukuk and allowing them to withdraw at any time. Wow! I wonder why our country (Mauritius) has still not understood that...

akagugo said...

And another question, if you don't mind: how is it different from "Amanah Saham 1 Malaysia"?

KwOnG FeI said...

@anonymous: in my humble opinion, things will not change even if the opposition took over..the funds from sukuk are 'said' for investmnet which involved agreement and so on. even if the government decided to stop the sukuk, our capital will be still returned just day the tenure 3 years are shortened.

@akagugo: erm.. not to extent of contributing.. as usually if we contribute we dont get rewards..

actually, it sort like the government is running out of budget or negative income compared to the yearly budget. When economic crisis occur or ppl said 'for political purposes funding', the govern needs extra money but how to get the extra money? So, it is like lending the ppl money for investment just like fixed deposit in banks. Since it is issued by government, it is more secure way and has higher rates compared to FD.

Amanah Saham 1 M is handled by PNB or sort of well established company in doing such unit trust etc whereas SUKUK is by Bank Negara which has less expertise on this field.

Of course, AS1M handled by professional will earn more money as they have diversified investments compared to SUKUK which is seemed for investment of much narrow and smaller scale.

mike said...

hello, Kwong..this S1M still available?? coz i plan to take out all the money from the gold investment account n invest here..

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