Under the Central Provident Fund Investment Scheme (CPFIS), we can use the money in our CPF account to invest into certain instruments.
One of these includes shares listed on the Singapore Stock Exchange (SGX).
In considering the inclusion of shares under CPFIS, the CPF board uses the following criteria:
- The shares are offered by a company that is incorporated in Singapore;
- The shares are listed on the SGX MainBoard; (Previous SESDAQ companies transferred to Catalist will continue to be included under CPFIS while new companies listing on Catalist will not be included until further assessment by CPF Board.)
- The shares are traded in Singapore Dollars; and
- The company allows CPF investors, who have pre-registered with CPF Agent Banks, to attend their shareholders’ meetings (if any) as observers.
So many S-Chips, including the dodgy ones, would actually fall under this approved list. And we know what happened to many of them.
Ironically, investors will not be allowed to invest into top overseas blue chips like Microsoft, Google and Walmart.
CPF should either make their current criteria more stringent so that the more risky Singapore listed companies are not allowed onto the scheme, or allow big overseas companies onto the scheme. Or both.
Otherwise, the current arrangement just does not make complete sense.
There is of course another hurdle and inconsistency. Under the recently introduced regulation whereby retail investors have to pass certain requirements before they can investing in Specified Investment Products (SIPs), overseas listed stocks fall under the SIP.
Therefore, we are again faced with the irony that everyone can invest into dodgy S-Chip companies, but not overseas blue chips.