Quora Answer: Should Vietnam Issue a US$1 Billion 10-Year Dollar Sovereign Bond, & at What Coupon?

The following is my answer to a Quora question: “Do you think issuing a $1 billion 10-year dollar bond is a good strategy for Vietnam?  What coupon should be issued for the bond?”

The question has two parts.  Is a US$1 billion 10-year dollar bond a sound strategic move for Vietnam?  And what coupon should it carry?  Neither answer is simple.

The Strategic Case

Vietnam’s economy warrants external borrowing for one straightforward reason: the infrastructure gap between its growth ambitions and its current capital stock is enormous.  GDP growth has averaged approximately 6 to 7 per cent annually over the past decade.  The Asian Development Bank estimates Vietnam’s infrastructure financing requirement at US$25 billion annually through 2030.  Domestic capital markets cannot absorb this demand at the required tenor.  The domestic bond market is shallow, dominated by short-duration instruments, and insufficient to fund decade-long infrastructure projects at scale.

A US$1 billion 10-year sovereign dollar bond achieves three things simultaneously.  It raises external capital at a fixed cost for a full decade.  It establishes a sovereign yield curve benchmark that Vietnamese corporates and state enterprises can price off — reducing the cost of subsequent private sector dollar issuance.  And it signals to international capital markets that Vietnam is a credible, accessible borrower — a signal with lasting value for a country integrating itself into global supply chains at an accelerating pace.

The supply chain dimension deserves specific attention.  Vietnam has been the primary beneficiary of the US-China manufacturing decoupling that accelerated from 2018 onward.  Apple, Samsung, Intel, and dozens of major technology manufacturers have relocated production capacity to Vietnam.  FDI inflows reached US$18 billion in 2025.  The country is building an industrial base that requires roads, ports, power infrastructure, and digital connectivity at a pace that domestic savings alone cannot fund.  A sovereign bond establishes the credibility architecture that attracts the institutional capital required to fund this build-out.  It is not merely a financing instrument.  It is a statement of intent.

Vietnam issued a US$1 billion 10-year sovereign bond in November 2021 at a coupon of 3.8 per cent.  Demand reached US$5 billion against the US$1 billion on offer — a five-times oversubscription that reflected the compressed yield environment of 2021 and investor appetite for Vietnamese sovereign credit.  The conditions in October 2026 are materially different.  The borrowing cost will be higher.  The strategic rationale is unchanged.

Vietnam’s Credit Profile

Vietnam carries a BB+ rating from both Standard & Poor’s and Fitch, and BB from Moody’s and regional rating agencies.  This places it in the upper tier of sub-investment grade sovereign borrowers — better positioned than Pakistan, less so than Indonesia, which achieved investment grade status with Moody’s in 2023.  The BB+ rating reflects credit strengths.

Vietnam’s public debt-to-GDP ratio is 37 per cent — conservative by regional standards and dramatically below the fiscal trajectories of the developed world.  The United States is at 122 per cent and rising.  Japan is at 250 per cent.  Vietnam’s fiscal position is not a problem.

Foreign exchange reserves are US$88 billion, representing 3.5 months of import cover — adequate, though the IMF’s recommended minimum of three months provides limited headroom against a sudden capital account reversal.  The State Bank of Vietnam has historically managed the dong-dollar exchange rate with a managed float that has provided reasonable stability, and interventions in the currency market have drawn on reserves at periods of stress.

Inflation was 3.35 per cent as of March 2026 — within the State Bank’s target band.  The interest rate is 4.50 per cent.  These are not the numbers of an economy under financial stress.  The current account has oscillated between modest surplus and modest deficit, reflecting the capital-intensive character of Vietnam’s manufacturing expansion.  The FDI inflows that fund this expansion are not debt — they are equity, which does not create the repayment obligations that external borrowing does.  The addition of a US$1 billion sovereign bond to the external liability profile is manageable within Vietnam’s current external balance sheet.

The credit weaknesses are institutional rather than macroeconomic.  Governance quality, transparency of public finances, the pace of state-owned enterprise reform, and the depth of the domestic capital market all constrain the rating.  The 2023 bond market crisis — in which several large Vietnamese property developers defaulted on domestic bond obligations, triggering a broader loss of confidence in the corporate bond market — demonstrated the fragility of domestic financial infrastructure when under stress.  International investors noted this.  The rating agencies noted this.  The spread demanded on Vietnamese sovereign dollar credit reflects it.

These are not problems that improve quickly.  They are structural and generational.  What matters for the immediate bond issuance is that they are known, documented, and already priced into the existing BB+ rating.  A new bond issuance does not create new institutional risk.  It creates new exposure to existing, quantified risk.

The Pricing Framework

The coupon on a Vietnamese 10-year dollar sovereign bond in October 2026 is determined by a straightforward framework, applied to market data that is moving daily.  The starting point is the US 10-year Treasury yield.  This is the risk-free rate — the return available on the most liquid, most creditworthy sovereign debt instrument in the world.  All other sovereign dollar bond yields are priced as a spread above this benchmark.

The US 10-year Treasury yield in early October 2026 is 4.5 to 4.7 per cent.  It has risen sharply in the October global sell-off — the same move that drove down Singapore bank stocks — as investors reassessed the trajectory of Federal Reserve policy following stronger-than-expected US employment data.  The yield has not yet found a stable level.  This uncertainty is itself a pricing input.

To the Treasury yield, the market adds a credit spread reflecting Vietnam’s rating, liquidity profile, and regional risk environment.  BB+ rated sovereigns trade at spreads of 150 to 250 basis points over equivalent US Treasuries in current market conditions.  The lower end of the range reflects stable, well-known credits with deep investor bases — Indonesia and the Philippines, for example.  The higher end reflects credits with shallower investor bases, less frequent issuance, and a risk-off market environment.  Vietnam sits toward the upper end of the BB+ range for the following reasons.

First, Vietnamese sovereign dollar bonds are less frequently traded than Indonesian or Philippine sovereigns.  Lower secondary market liquidity commands a premium.  Investors who buy a less liquid instrument must be compensated for the possibility that they cannot exit at a reasonable price if conditions deteriorate.

Second, the October 2026 market environment is risk-off.  Global banking stocks are selling off.  US Treasury yields are volatile.  Emerging market credit spreads are widening across the board.  Issuing into a risk-off environment means paying a spread that reflects current conditions rather than the tighter spreads available in more favourable windows.

Third, Vietnam’s domestic bond market crisis of 2023 introduced a residual caution among international investors that has not fully dissipated.  The sovereign credit is insulated from corporate defaults — the government did not guarantee the defaulting property developers — but the episode demonstrated that Vietnam’s financial system infrastructure has vulnerabilities that more mature markets do not.

The Vietnam 10-year domestic government bond yield was 4.47 to 4.57 per cent as of early October 2026.  This is the dong-denominated rate — the rate Vietnamese institutional investors demand for lending to their own government in their own currency.  Dollar bond investors require additional compensation for three things the domestic rate does not carry: US dollar funding costs, currency conversion risk, and the illiquidity premium of holding a less actively traded instrument in a foreign market.

Assembling these components:

US 10-year Treasury yield: approximately 4.5 to 4.7 per cent.

Credit spread for BB+ Vietnamese sovereign: approximately 175 to 225 basis points.

Illiquidity and new issue premium: approximately 25 basis points.

Total: approximately 6.25 to 7.0 per cent.

The midpoint —6.5 per cent — is the defensible starting point for any bookrunner’s initial price thoughts.  In practice, bookrunners launch at a spread wider than where they expect to price, collect orders, and tighten the spread as demand builds.  A well-executed book-building process on a Vietnamese sovereign could price at 6.25 per cent if demand is strong.  A weaker book in the current risk-off environment could result in pricing at 6.75 per cent or above.

The 2021 bond priced at 3.8 per cent.  The difference between 3.8 per cent and 6.5 per cent is not a reflection of Vietnam’s credit deterioration.  Vietnam’s fundamentals are, if anything, stronger in 2026 than they were in 2021.  The difference is the global rate environment.  Borrowing at 6.5 per cent in 2026 is the consequence of borrowing in a world that has rediscovered what interest rates are.

The OECD Accession Dimension

A specific and underappreciated factor strengthens the strategic case for issuance: Vietnam’s OECD accession process.  Vietnam formally applied for OECD membership and has been engaged in the accession review process.  OECD membership — or even the credible candidacy for membership — provides a strong positive signal to international capital markets about the trajectory of governance, institutional quality, and regulatory frameworks.  Thailand’s formal invitation to begin OECD accession negotiations in 2024 produced a measurable tightening of Thai sovereign credit spreads as investors repriced the country’s institutional risk trajectory.

Vietnam’s OECD accession, if it proceeds, will progressively tighten the spread demanded on Vietnamese sovereign credit as investors reprice the institutional risk premium downward.  Issuing a sovereign bond in the current period — before accession is formalised — means paying a spread that includes the institutional risk premium.  A bond issued after accession progress becomes clearer will be cheaper.

This is an argument for patience.  Not indefinitely — the infrastructure need is real, and the benchmark curve has value regardless of the rate environment — but specifically for waiting until OECD accession milestones have produced measurable spread tightening.

The Timing Question

The strategic case for the bond is sound.  The timing is not ideal.  October 2026 presents three simultaneous headwinds.  US Treasury yields are elevated and volatile, driven by stronger-than-expected US employment data and uncertainty about the Federal Reserve’s terminal rate.  Emerging market credit spreads are widening across the board as risk appetite contracts.  The global banking sector sell-off of 7^th and 8^th October — in which OCBC fell 10 per cent, DBS fell 6 per cent, and UOB fell 8 per cent in two trading sessions — is symptomatic of the broader risk-off shift that makes any sub-investment grade issuance more expensive in this window.

These are cyclical, not structural, headwinds.  They will reverse.  The question for Vietnam’s government finance ministry is whether the capital requirement is urgent enough to justify the current spread environment.  If the infrastructure pipeline has projects ready for immediate deployment — power plants, ports, road corridors — with internal rates of return above 6.5 per cent over ten years, then issuing now is financially rational.  Paying 6.5 per cent for infrastructure generating 8 per cent returns is sound economics regardless of market timing.

If the issuance is more opportunistic — building reserves, pre-financing future maturities, or establishing the benchmark curve without an immediate deployment need — then waiting for a more favourable window in Q1 or Q2 2027 is the disciplined choice.  US Treasury volatility is likely to subside as the Federal Reserve’s rate trajectory becomes clearer.  Vietnamese sovereign credit spreads are likely to tighten as OECD accession progress becomes visible.  The combination could reduce the borrowing cost by 50 to 100 basis points — representing US$50 million to US$100 million in interest savings over the bond’s ten-year life on a US$1 billion issuance.

The Recommendation

Vietnam should issue the bond.  The strategic rationale is strong, the credit fundamentals support the issuance, and the benchmark curve value is real and lasting.  The coupon in current conditions is 6.25 to 6.75 per cent — a midpoint of 6.5 per cent.  This is not a reflection of Vietnam’s creditworthiness.  It is the price of the global rate environment.  The timing should be driven by project readiness rather than market opportunism.  If the capital has a deployment home, issue now.  If it does not, wait for Q1 2027 when conditions may be more favourable.

What Vietnam should not do is allow the higher coupon to deter the issuance entirely.  The strategic benefits — the benchmark curve, the institutional credibility, the signal to international investors — do not disappear because the rate environment is unfavourable.  They are durable and compound over time.  The 2021 bond at 3.8 per cent was a windfall.  The 2026 bond at 6.5 per cent is the price of doing business in a world with normal interest rates.  Vietnam can afford both.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Is the Risk of Fiscal Crisis Due to the National Debt Priced into Current US Interest Rates?

The following is my answer to a Quora question: “Do you think the risk of a fiscal crisis due to the national debt is priced into current US interest rates?”

No.  US interest rates are not a risk premium on fiscal sustainability.  They are a response to inflation.  The Federal Reserve’s dual mandate is price stability and maximum employment.  Sovereign credit risk does not appear in that mandate.  When the Federal Open Market Committee sets the Federal Funds Rate, its primary input is the Consumer Price Index — not the Congressional Budget Office’s debt trajectory projections.

A market that prices fiscal risk into rates is a market making a judgement about the US government’s long-term ability to service its obligations.  The US rate market is doing something categorically different.  It is making a judgement about whether current monetary conditions are tight enough to bring inflation to 2 per cent.  The US$36 trillion national debt is background noise, not a pricing input.

The Federal Reserve raised the Federal Funds Rate from near zero in March 2022 to 5.25 to 5.50 per cent by July 2023.  This was a response to inflation reaching 9.1 per cent in June 2022 — the highest since November 1981.  The national debt was over US$30 trillion throughout this period.  The rate decisions did not reference the debt level.  They referenced CPI, PCE deflator, and labour market data.

The Federal Reserve then cut rates three times in the second half of 2024, reducing the Federal Funds Rate to 4.25 to 4.50 per cent.  At that point, the national debt had crossed US$36 trillion.  The cuts were made because inflation had declined toward target.  The fact that the debt had increased by trillions during the hiking cycle did not affect the cutting decision.  The Federal Reserve can, and does, set rates at levels inconsistent with what sovereign credit risk would demand if the market were pricing it.

The Moody’s Downgrade

Moody’s downgraded the United States from AAA to Aa1 in May 2025 — the last of the three major credit rating agencies to strip the US of its top rating, following Standard & Poor’s in 2011 and Fitch in 2023.  The rationale was the trajectory of the national debt and the government’s inability to agree on fiscal consolidation.

US Treasury yields moved modestly and briefly.  The dollar remained the world’s primary reserve currency.  Foreign central banks continued purchasing Treasuries.  The 10-year yield was 4.5 per cent before the downgrade and 4.5 per cent shortly after.  The S&P downgrade of 2011 produced a similar non-event.  Standard & Poor’s removed the AAA rating in August 2011 — and US Treasury yields fell, because investors fleeing equity market volatility ran into Treasuries as the haven.  The downgrade of the issuer caused investors to buy more of the issuer’s debt.  Credit risk theory does not cover this scenario.

It is not that the market trusts the US government’s fiscal discipline.  It is that the alternatives are worse.  The dollar’s reserve currency status means that global demand for dollar-denominated assets is structural and not driven by yield.  Central banks hold Treasuries because they need to hold something liquid, globally accepted, and available in sufficient scale — not because US fiscal policy is admirable.

The Doom Loop

The projection is that the US debt-to-GDP ratio will rise — it is currently approximately 122 per cent, and the CBO projects it reaching 122 per cent by 2034 on the current trajectory.  Investors demand a higher yield to compensate for the increasing risk.  Higher yields increase the cost of servicing the existing debt.  Higher debt service costs increase the deficit.  A larger deficit requires more borrowing.  More borrowing pushes yields higher.  The spiral continues until the fiscal position becomes unsustainable.

This doom loop has been predicted for the United States with remarkable consistency for approximately forty years.  It has not materialised.  The primary reason is the reserve currency mechanism.  The US can issue debt in its own currency to investors who need that currency.  A doom loop requires investors to lose confidence and demand compensation.  Structural demand from reserve managers who need dollar assets regardless of yield prevents the confidence loss from reaching the threshold required to trigger the spiral.

This does not mean the risk is zero.  It means the risk is deferred — and the deferral mechanism depends on the continued willingness of the world to treat dollar assets as the default store of value.

That willingness is eroding.  The dollar’s share of global foreign exchange reserves has fallen from 71 per cent in 1999 to approximately 56 per cent in mid-2025.  Central banks are diversifying into gold — purchasing over 1,000 tonnes annually for three consecutive years.  Gold overtook US Treasuries in total central bank foreign exchange reserve holdings in early 2026.  The weaponisation of dollar assets against Russia in 2022 accelerated this diversification among non-aligned central banks.

The erosion is slow.  It is measurable.  Each percentage point of reserve share lost reduces the structural demand for Treasuries and marginally increases the yield required to attract the marginal buyer.  Over a decade, those basis points compound.

The Inflation Mechanism versus the Solvency Mechanism

The critical distinction is between two different mechanisms by which fiscal stress could eventually manifest in rates.  The first is the solvency mechanism — markets conclude the US cannot or will not service its debt and demand a risk premium.  This is the fiscal crisis scenario.  It has not happened and, given the reserve currency architecture, is unlikely to happen suddenly.

The second is the inflation mechanism — the US government finances its deficit through money creation rather than borrowing; the monetary base expands, inflation rises, and the Federal Reserve responds by raising rates.  This is not fiscal risk being priced into rates.  This is fiscal irresponsibility causing inflation, which the Federal Reserve then addresses through its standard inflation mandate.

The United States has been operating closer to the second mechanism than the first.  The fiscal stimulus of 2020 and 2021 — US$5 trillion deployed in response to COVID-19 — contributed materially to the inflation surge of 2022.  The Federal Reserve’s subsequent rate hikes were the inflation response, not the fiscal risk response.  The distinction is not semantic.  It determines whether the rate increases represent a market assessment of US sovereign creditworthiness or simply a central bank doing its job.

The answer is the latter.  US interest rates reflect inflation, not fiscal risk.  The fiscal risk will eventually manifest — but it will most likely do so through the inflation channel rather than through a sudden repricing of sovereign credit.  The Federal Reserve will raise rates.  It will call it fighting inflation.  The underlying cause will be fiscal.  The mechanism will remain monetary.

By the time the market prices fiscal risk into Treasury yields — if it ever does — the question of whether it was priced in will be academic.  The more useful question, for investors positioning today, is whether they have sufficient non-dollar, non-Treasury exposure to absorb the adjustment when the inflation mechanism runs its course.  The answer, for most retail portfolios, is no.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Your Paycheque Has an Expiry Date; Your Bills Do Not

The following are the background notes prepared for my client presentation.  This was prepared for an audience of 150 people for a regional office.

I am putting forth the case for structured accumulation in a market that punishes the underprepared.

Here is the tightened and expanded article:

Your Paycheque Has an Expiry Date; Your Bills Do Not

If you stopped working today — right now, this moment — how long could you survive on what you have accumulated?  Most people who consider that question arrive at an answer that makes them uncomfortable.  That discomfort is not a personality flaw.  It is a data point.  It is the distance between where they are and where they need to be.  And if the distance is large enough, no amount of market timing, clever networking, or motivated LinkedIn posts will close it in time.

Three lies keep people from acting, and one instrument that — deployed with discipline and without illusions about one’s own investment temperament — addresses all three simultaneously.

The Arithmetic

The average Singaporean retires at sixty-three.  Life expectancy here is eighty-three.  That is twenty years of bills with no paycheque.  A household spending S$5,000 per month needs S$1.2 million at retirement — and that assumes zero inflation, no medical events, and costs that remain where they are today.  None of those assumptions survives contact with reality.

Medical costs in Singapore are rising at approximately 10 per cent per year.  The Ministry of Health projects that one in three Singaporeans will develop cancer in their lifetime.  Average treatment costs run from S$100,000 to S$300,000 — before accounting for lost income, caregiver costs, or the economic consequences of a breadwinner unable to work for a year or two.

Most people know this.  They file it in the same mental drawer as their overdue will and their dental appointment from 2019.  They acknowledge it exists.  They do nothing about it.  That drawer is expensive.

Myth One: “I Already Have Insurance.”

This is the most socially acceptable form of denial.  It is also the most dangerous.  Having insurance is not the same as having adequate insurance.  That distinction is not semantic.  It is the difference between a family that survives a medical event financially intact and a family that exits hospital with the breadwinner alive and the household bankrupt.

Singapore’s Integrated Shield Plans cover hospitalisation.  They do this well within their scope.  The problem is that hospitalisation is one cost — often not even the largest one.  In 2021, the National University Cancer Institute Singapore published data showing the average cancer patient loses between 30 per cent and 50 per cent of their income during active treatment.  Many lose it entirely.  The Shield Plan does not replace that income.  Medisave does not replace that income.  CPF Life — assuming the patient has not yet reached 65 — will not replace that income.  Whatever savings exist beyond the CPF Ordinary Account will be drained within months.

Then add the caregiver.  The spouse who reduces working hours.  The sibling who takes unpaid leave.  The parent who stops consulting.  That is a second income stream interrupted.  The Shield Plan covers none of it.

Consider the case of Mr Tan Ah Kow — not a real name, but a real pattern repeated across thousands of Singaporean households every year.  Senior manager, mid-fifties, Integrated Shield Plan with a rider, a reasonable CPF balance, a condominium with an outstanding mortgage.  Diagnosed with Stage 3 colorectal cancer.  Treatment takes eighteen months.  He cannot work.  His wife reduces her hours to manage his care.  Their combined income drops by 70 per cent.  The Shield Plan covers the hospital bills.  It covers nothing else.  By the time he recovers, the mortgage arrears have accumulated.  The condominium goes on the market.  The Shield Plan worked as designed.  The family was still financially destroyed.

Ask yourself whether your insurance pays a monthly income if you cannot work for two years.  In most cases, the answer is no.  Then ask what, exactly, the insurance is covering.  The event.  Not the aftermath.  A fire extinguisher is useful.  It does not rebuild the house.

Myth Two: “I Can Invest on My Own.”

You probably can.  The question is whether you do — consistently, without emotional interference, over decades, through crashes, crises, and the human tendency to confuse recent performance with future certainty.  The data is not encouraging.

Dalbar Inc. has published its Quantitative Analysis of Investor Behaviour annually since 1994.  The findings have been consistent across three decades: the average retail investor underperforms the index funds they invest in by 1.5 to 2 percentage points per year.  Not because the products are bad.  Because the investor’s behaviour is bad.  They buy when sentiment is high.  They sell when sentiment is low.  They do the opposite of what the strategy requires, every single cycle, and then wonder why the returns do not match the brochure.

Singapore provides its own evidence.  The Straits Times Index fell 49 per cent between October 2007 and March 2009.  It fell 30 per cent in six weeks in early 2020.  During both events, retail brokerage data showed net outflows.  People sold.  Many sold near the bottom.  When markets recovered, they bought back in near the top.  The wealth destruction this behaviour caused is incalculable — not because the market took it, but because the investor handed it over voluntarily.

Here is an anecdote that should settle the debate.  In 2020, a senior fund manager at a regional private bank — someone who manages nine figures of client assets for a living — told me privately that he had liquidated a significant portion of his personal equity holdings in March 2020 because he was “not sure how bad it would get.”  The S&P 500 bottomed on 23^rd March 2020.  He bought back in six months later.  He cost himself, by his own estimate, 40 per cent in foregone gains.  This is a professional whose entire career is built on reading markets.  He still could not do it.

This is not stupidity.  It is biology.  The human brain is not designed for long-term financial discipline.  It is designed for immediate threat response.  A falling portfolio triggers the same neurological alarm as a predator.  The instinct is to run.  The correct financial response is to hold, or to buy more.  Most people cannot execute that response without a structural mechanism that removes the decision from them entirely.

That mechanism is called automation.  A regular premium policy invests a fixed amount every month regardless of market conditions.  It enforces dollar-cost averaging without requiring the investor to be braver than biology allows.  It executes whether the investor is watching or not, frightened or not, whether the headlines are catastrophic or not.  This is not a deficiency in the investor.  It is a feature of the structure.

Myth Three: “It Will Never Happen to Me.”

This is the most human myth.  It is also statistically illiterate.  The Ministry of Manpower reported over 20,000 Singaporeans retrenched in 2020.  That figure excludes the workers who took pay cuts, accepted reduced hours, lost commissions, or had contracts terminated without formal retrenchment notices.  The number of households whose income was materially disrupted is a multiple of the official figure.

The median age of retrenchment in Singapore is forty-seven.  Not sixty-five.  Fifteen years before the standard retirement age, at a point when the mortgage is outstanding, children are approaching university, and parents are entering the phase of life that requires financial support from their children rather than the other way around.

In 2016, Credit Suisse Asset Management retrenched a wave of employees across its Singapore operations as part of a broader regional restructuring.  Several of the affected individuals were in their late forties and early fifties, with twenty-plus years of industry experience, strong track records, and the reasonable expectation that their careers had another decade of productive life.  Some found equivalent roles within six months.  Others did not find comparable compensation for two years or more.  Several took roles at significant pay reductions simply to maintain cash flow.  None of them had planned for that scenario.  None of them believed, on the day they accepted their positions at Credit Suisse, that they would be job-hunting at fifty-two.

This pattern repeated in 2023 when the global technology retrenchment wave reached Singapore.  Meta, Google, and Shopee all reduced headcount locally.  Many of the affected were mid-career professionals in their late thirties and forties — the demographic that statistically feels most financially secure and is, in practice, most exposed.

The 2008 Global Financial Crisis produced an additional casualty that does not appear in retrenchment statistics: the self-employed professional whose client base evaporated within ninety days.  The consultant.  The freelancer.  The boutique advisory firm partner.  In Singapore, the Urban Redevelopment Authority recorded a significant increase in forced property sales between 2009 and 2011.  These were not reckless speculators.  Many were professionals who had believed, sincerely, that their income streams were durable.  They were not.

In 2015, then-Deputy Prime Minister Tharman Shanmugaratnam warned publicly that CPF balances were insufficient to fund twenty years of retirement without supplementary savings.  He had access to the actual numbers.  The relevant question is what most Singaporeans did with that information.  Very little.

The Instrument

I give one example here.  The AIA Adventurous Index Fund is a unit-linked fund available within an Investment-Linked Policy (ILP).  The fund is not the ILP.  The ILP is the policy structure; the fund is one of the investment options available within it.  Within an ILP, the premium is split.  One portion funds the life insurance component — the sum assured payable on death or total and permanent disability.  The remainder is invested in funds of the policyholder’s choice.  The Adventurous Index Fund tracks a diversified global equity index across multiple markets and sectors.  It is not a bet on one company, one industry, or one country.

The ILP structure carries one feature that a standalone investment portfolio does not.  If the policyholder dies before the investment has accumulated to a meaningful value, the family receives the sum assured — typically a multiple of the fund value in the early years of the policy.  The insurance component covers the shortfall that compounding has not yet had time to address.  For anyone with dependants, this is not a footnote.  It is the central argument for the structure.

Medical Inflation

A treatment costing S$50,000 today costs S$130,000 in ten years at 10 per cent annual growth.  In twenty years, it costs S$340,000.  These figures come from applying a consistent historical growth rate to Ministry of Health baseline data — not from a product brochure.  The Shield Plan covers hospitalisation.  It does not grow to meet future costs.  The ILP fund does grow.  Over a sufficiently long horizon, it creates a capital reserve that the Shield Plan cannot.

The Cashflow Gap

CPF Life’s Basic Retirement Sum yields between S$750 and S$850 per month at 65.  The Full Retirement Sum yields between S$1,000 and S$1,200 per month.  The Enhanced Retirement Sum yields approximately S$1,700 per month.

The median monthly household expenditure in Singapore, per the Department of Statistics’ 2022/23 Household Expenditure Survey, was approximately S$4,900.  CPF Life at maximum payout covers one-third of that.  The rest must come from somewhere.

The ILP, accumulated over twenty to thirty years, creates a capital pool that bridges that gap.  It is a sinking fund — a deliberate accumulation against a known future liability.  Every actuary understands this concept instinctively.  Most retail investors encounter it only when the gap has already opened beneath them.

Future Costs Already Visible

A local degree currently costs between S$30,000 and S$70,000.  An overseas degree — the United Kingdom, Australia, the United States — runs between S$200,000 and S$400,000, including tuition, accommodation, and living expenses.  In ten years, both figures will be higher.

Nursing home care at a subsidised facility in Singapore costs approximately S$1,300 per month.  Private facilities run between S$3,000 and S$6,000 per month.  A five-year stay at a private facility costs between S$180,000 and S$360,000.  For a couple, double that.

These are not remote possibilities.  They are near certainties for anyone in their thirties or forties today.  The only question is whether the capital will exist to meet them.

The Uncomfortable Conclusion

Having a view is not the same as having a plan.  A plan has a structure, a timeline, contingencies for the scenarios you did not choose, and a mechanism that executes without requiring you to be rational during a crisis.  The brokerage account gives you access.  The ILP gives you structure, protection, and enforced discipline — simultaneously.

None of this is complicated.  Complexity is the industry’s preferred method of distracting people from the fact that the fundamentals are simple.  You need more capital than you think.  You will live longer than you expect.  The costs ahead are higher than you have budgeted for.  The window in which compounding does the heavy lifting is shorter than it was yesterday.  Your paycheque has an expiry date.  Your bills do not.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: What are the Principles behind Singapore’s National Reserves?

The following is my answer to a Quora question: “What are the principles behind Singapore’s national reserve?”

Every few years, some well-meaning commentator demands Singapore disclose the exact size of its reserves.  They call it transparency.  I call it economic illiteracy dressed up as civic virtue.  Singapore built one of the most disciplined reserve protection systems on the planet because most governments cannot be trusted with a blank cheque, and the data on what happens elsewhere proves the point.

What the Reserves Actually Are

The Constitution of the Republic of Singapore defines reserves as the excess of assets over liabilities of the Government, statutory boards, and government companies.  Strip away the legal language and the concept is simple.  Assets include cash, shares, land, and buildings.  Liabilities include Singapore Government Securities and Special Singapore Government Securities issued to the Central Provident Fund Board.

Under the Government Securities (Debt Market and Investment) Act 1992, the Government cannot spend the proceeds raised from issuing Singapore Government Securities.  Most countries borrow to fund deficits.  Singapore borrows to develop its domestic bond market and park the proceeds as reserves.  Singapore’s headline debt-to-GDP ratio looks large on paper.  It is also, functionally, a sovereign savings instrument rather than a sovereign liability in the conventional sense.  Compare that discipline to governments that borrow to cover today’s payroll and leave tomorrow’s taxpayer holding the bill.

The Two-Key System

Lee Kuan Yew, first Prime Minister of Singapore, raised the idea of giving the presidency veto powers over the reserves in August 1984.  Six years later, Goh Chok Tong, then First Deputy Prime Minister and later second Prime Minister of Singapore, introduced the Constitution of the Republic of Singapore (Amendment No. 3) Bill in Parliament.  Parliament passed it on 3^rd January 1991.  It took effect on 30^th November 1991.

The mechanism is simple to describe and brutal to circumvent.  The Government holds one key.  The President holds the other.  Neither can access past reserves alone.  Ong Teng Cheong, the first President elected under this scheme, worked with the Government through 1999 to develop the working principles that still govern drawdowns today, tabled in Parliament on 2^nd July 1999.

The system has been tested in real crises, not hypothetical ones.  In October 2008, at the height of the global financial crisis, the Government sought presidential approval for a S$150 billion guarantee on all local bank deposits, backed by past reserves.  In January 2009, Sellapan Ramanathan, sixth President of Singapore, gave the first approval in the history of the elected presidency for a S$4.9 billion drawdown to fund the Budget.  That is the system functioning as designed: access in an emergency, friction against casual raiding.

The Checks beyond the President

The President can withhold assent to any Supply Bill, Supplementary Supply Bill, or Final Supply Bill that is likely to draw on past reserves, which blocks the entire Budget for the year.  Statutory boards and government companies listed under the Fifth Schedule, among them the Central Provident Fund Board, the Housing and Development Board, the Jurong Town Corporation, the Monetary Authority of Singapore, GIC, and Temasek Holdings, must present their budgets to the President for approval before each financial year begins.  The accountant-general and auditor-general must flag any proposed transaction likely to draw on past reserves.

Even the presidential veto has a check on itself.  The Constitution requires the President to consult the Council of Presidential Advisers before deciding.  If he withholds assent against the Council’s recommendation, Parliament can overrule him with a two-thirds majority resolution.  Nobody holds unchecked power here.

Who Manages the Money

The Monetary Authority of Singapore manages the Official Foreign Reserves, the most conservative of the three pools, weighted heavily toward liquid financial instruments because its job is defending the currency, not chasing returns.  Reserves stood at S$427.9 billion as at July 2025.

GIC Pte. Ltd. manages Government assets with a mandate to preserve and grow the international purchasing power of the reserves over the long term, investing conservatively across a globally diversified portfolio.  GIC has never disclosed an exact figure, stating only that it manages “well over US$100 billion.”  The Sovereign Wealth Fund Institute has estimated the true figure closer to US$800 billion, though that remains an outside estimate, not an official one.

Temasek Holdings, by contrast, is an active, value-oriented equity investor answerable to no government representation on its board.  Its net portfolio value reached a record S$434 billion for the financial year ended 31^st March 2025, up S$45 billion from the year before, with a total shareholder return since its 1974 inception of 14 per cent per annum in Singapore dollar terms.

The Opacity is Deliberate

The Government has never published the combined total.  Publishing MAS and Temasek figures alongside an exact GIC number would hand the market the complete picture, and a complete picture is a target.  Consider what happened to Thailand in 1997.  The Bank of Thailand spent down its foreign reserves defending the baht against speculative attack until the reserves were effectively exhausted, forcing a float of the currency, a collapse in value, and an International Monetary Fund bailout that triggered the wider Asian Financial Crisis.  A central bank with a known, finite, and dwindling war chest is an invitation to speculators.  Singapore’s refusal to publish an exact total denies anyone that invitation.

Sri Lanka offers the harshest recent lesson on what happens when a nation treats its reserves as a slush fund rather than a sacred trust.  By April 2022, Sri Lanka’s usable foreign reserves had fallen to US$50 million, nowhere near enough to cover fuel or food imports for a population of twenty-two million.  Fuel queues stretched for kilometres.  Rolling power cuts lasted up to thirteen hours a day.  Mass protests stormed the presidential residence, and Gotabaya Rajapaksa, then President of Sri Lanka, fled the country and resigned by email from Singapore, of all places.  Sri Lanka defaulted on its external debt for the first time in its history that same month.

That is the counterfactual Singapore’s constitutional architects were guarding against from 1984 onward.  Nobody builds a two-key system and a Council of Presidential Advisers because they expect their own Government to behave responsibly forever.  They build it because they have watched what happens to countries that assumed theirs would.

From Net Investment Income to Net Investment Returns

Two constitutional amendments reshaped how much of the reserves’ earnings the Government can spend.  The Constitution of the Republic of Singapore (Amendment) Act 2001, passed on 12^th January 2001, capped annual spending at 50 per cent of Net Investment Income, the interest and dividends earned from past reserves, net of costs.  Before that amendment, there was no cap at all.

The Constitution of the Republic of Singapore (Amendment) Act 2008, passed on 21^st October 2008 and effective from 1^st January 2009, broadened the base.  Net Investment Returns replaced Net Investment Income as the spending benchmark, now incorporating the long-term expected real rate of return from GIC and MAS alongside the investment income earned through Temasek.  The 50 per cent cap stayed in place.  The pool it applied to simply grew larger.

The result is the Net Investment Returns Contribution, which supplements the annual Budget directly.  It came to an estimated S$19.6 billion in Financial Year 2021 alone, funding education, research and development, healthcare, and infrastructure.  It has, in recent years, stood as the single largest contributor to Singapore’s Budget, ahead of corporate income tax and ahead of the Goods and Services Tax.  Few taxpayers appreciate that the single biggest line item funding their hospitals and schools is not a tax at all.  It is compound interest, protected by a president who cannot touch the principal without consulting a council, consulting Parliament, and surviving a two-thirds vote against him if he gets it wrong.

That is the principle behind Singapore’s national reserve.  Not secrecy for its own sake.  Not hoarding for the sake of a number on a page nobody is permitted to see.  Structural paranoia, codified into the Constitution, because the alternative has a body count measured in fuel queues and collapsed currencies, and Singapore had no intention of learning that lesson the way Sri Lanka did.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Warren Edward Buffett’s Financial Statement Checklist is Not a Horoscope

Every financial content creator on social media has shared some version of this cheat sheet.  Few explain why the numbers matter.  Fewer still have read a single page of Warren Edward Buffett’s shareholder letters.  The image attributes these thresholds to Buffett, compiled by Brian Feroldi, a financial writer known for distilling investing frameworks into shareable graphics.  It is a heuristic, not a verbatim Buffett quote, and it deserves to be treated as one.  That does not make it useless.  It makes it worth explaining properly, instead of treating this as scripture.

Income Statement: Where the Moat Lives

Gross margin above 40 per cent is the first filter, and it exists for one reason.  A company that can charge far more than its cost of goods has pricing power.  Pricing power means a moat.  Buffett has said that he looks for businesses “so wonderful that an idiot can run them,” because eventually, one will.  A fat gross margin is the clearest signature of that wonder.  It tells you customers pay for the brand, not the ingredients.

Selling, General, and Administrative expenses (SG&A) margin below 30 per cent of gross profit and R&D margin below 30 per cent of gross profit work together.  Low SG&A signals operating discipline; the company is not haemorrhaging profit into overhead.  Low R&D signals something sharper: predictability.  Buffett avoided the technology sector for decades, and he said so in his 1999 letter, admitting he could not judge which technology companies would still be standing in twenty years.  A business that must spend heavily on research just to stay relevant is a business whose moat is eroding in real time.  He wants businesses where the product does not need reinventing every eighteen months.

Depreciation margin under 10 per cent and interest margin under 15 per cent both test capital intensity and leverage.  A company burning through plant and equipment needs constant reinvestment merely to stand still.  A company paying heavy interest relative to operating income is one bad year away from a liquidity crisis.  Buffett wrote in his 1987 letter that he would rather own “a business with terrific economics” than one requiring “ever-greater amounts of capital” to produce the same earnings.

Tax margin near the corporate rate is a quiet integrity check.  A company paying less than the statutory rate, year after year, is either exploiting a jurisdiction loophole that will eventually close, or cooking the books.  Buffett wants earnings that are real, not earnings engineered by a tax department.

Net income margin above 20 per cent and growing earnings per share is the scoreboard.  Everything above either produces that result, or it does not.

Balance Sheet: Survival Before Growth

Cash exceeding debt is not a suggestion.  It is a survival requirement.  Buffett wrote after the 2008 financial crisis that Berkshire Hathaway kept at least US$20 billion in cash so the company would never be forced to depend on the kindness of lenders during a panic.  Berkshire Hathaway’s cash and equivalents stood north of US$300 billion by 2024, a position critics mocked for years as excessive caution, right up until every market downturn vindicated it.

Adjusted debt-to-equity below 0.80 and no preferred stock both reinforce the same principle.  Preferred shareholders get paid before common shareholders in a liquidation, which dilutes the interest of the owner-investor Buffett wants to be.  He avoids capital structures where he stands behind someone else in the queue.

Retained earnings growing consistently, and treasury stock existing, measure whether management knows what to do with the cash the business throws off.  Growing retained earnings show reinvestment power.  Treasury stock shows discipline: buying back shares only when the price sits below intrinsic value, a test Buffett has applied publicly to Berkshire Hathaway’s own buybacks since 2018, refusing to repurchase stock he judged overpriced even when shareholders clamoured for it.

Cash Flow: Owner Earnings, Not Accounting Fiction

Capex margin under 25 per cent of net income is the single cleanest test of what Buffett calls “owner earnings,” a term he coined in his 1986 letter.  Net income is an accounting construct.  Owner earnings are what is left over after the business spends what it must to maintain itself.  A company that reinvests all its net income into capital expenditure is not generating wealth for its owners.  It is running to stand still.

See’s Candies: The Textbook Case

In 1972, Buffett and Charles Thomas Munger paid US$25 million for See’s Candies, a West Coast chocolate retailer earning US$4 million pre-tax on just US$8 million of net tangible assets.  That is a pre-tax return on capital above 50 per cent, the kind of gross margin and capital efficiency the checklist is built to detect.  Buffett nearly walked away over the price, later admitting in his shareholder letters that his own caution “could have scuttled a terrific purchase.”

The sellers took the deal.  By 2014, See’s Candies had generated US$1.9 billion in cumulative pre-tax earnings for Berkshire Hathaway, having required only US$40 million of additional reinvested capital across more than four decades.  Depreciation margin low, capex margin low, net income margin extraordinary.  See’s Candies is not an anecdote Buffett tells for colour.  It is the live demonstration of every ratio on that chart working in concert.

Precision Castparts: What Happens When You Ignore Your Own Rules

Contrast that with Precision Castparts, an aerospace parts manufacturer Berkshire Hathaway acquired for US$32.1 billion in 2016, its largest acquisition ever.  The business carried none of See’s Candies effortless capital efficiency.  Aerospace manufacturing demands heavy, continuous capital expenditure, and its fortunes swing with airline order cycles entirely outside management’s control.  Buffett later confessed, in his 2021 letter, that he had been “simply too optimistic about PCC’s normalised profit potential.”

The cost of that optimism was brutal.  Berkshire Hathaway wrote down US$9.8 billion of Precision Castparts’ value in August 2020 alone, contributing to a US$11 billion loss for the year, even as the rest of the conglomerate posted a US$42.5 billion profit.  Precision shed over 13,400 jobs, 40 per cent of its workforce.  Buffett did not blame the pandemic.  He blamed his own price discipline, admitting, “I paid too much for the company.”  That is what it looks like when a company’s economics sit on the wrong side of this checklist.

The Verdict

A gross margin above 40 per cent is not a magic number.  It is a proxy for a moat.  A debt-to-equity ratio below 0.80 is not superstition.  It is a proxy for survival.  Every threshold on that chart exists because Buffett learned, through decades of both triumphs like See’s Candies and admitted failures like Precision Castparts, that businesses obeying these patterns compound wealth, and businesses that do not eventually demand a confession in the annual letter.  Memorise the ratios if you like.  Understand why they exist, or you are simply reciting a horoscope with extra decimal places.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code