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RI investors get burned on Lehman woes
Housewife Elfrida Lingga recalls the day she received a shocking call from Citibank Indonesia early last week, informing her of a massive probable loss in her US$50,000 investment with the Citigold wealth management banking program
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Housewife Elfrida Lingga recalls the day she received a shocking call from Citibank Indonesia early last week, informing her of a massive probable loss in her US$50,000 investment with the Citigold wealth management banking program.
Her lifetime savings were now in jeopardy after Citibank admitted her investment portfolio, linked to Lehman Brothers' principal protected notes she bought through Citibank, could be wiped out following the U.S. investment bank's bankruptcy.
"I am very disappointed with Citibank because it failed to properly warn me earlier that the portfolio value had fallen so steeply for some time before Lehman went bankrupt. I could have redeemed it to cut my losses," she said.
She said a Citigold executive at the bank's Pondok Indah branch office told her there were about 80 investors threatened with big losses due to the Lehman Brothers' bankruptcy, not to mention investors at other Citibank branches across the country.
"The bank executive said I can recover only 10 or 15 percent of the investment after Lehman completes the liquidation of its assets, and the evaluation is still in progress," she said.
Elfrida told of a senior Central Java Trade Agency official who expressed his anger after meeting with Citibank Pondok Indah officials last week.
The official, accompanied by his wife, acknowledged he bought principal protected notes linked to Lehman Brothers, believing the Citibank assurance that he could redeem at least the principal at maturity date.
"But now, I am told I may lose the whole amount or may recover only a tiny fraction, and I felt cheated because they never alerted me to such a huge risk," he said.
The potential returns of the Lehman notes were linked to the performance of the Hang Seng China Enterprises Index, Korean KOSPI 200 Index and the Tokyo Stock Exchange REIT.
Although the downfall of U.S. financial giant Lehman Brothers Holdings Inc. has not yet directly hit the Indonesian financial establishment, several local high-income investors have suffered hefty losses in their portfolios in overseas banks.
The Citibank investment trouble is just the tip of the iceberg, with several foreign banks operating in Indonesia expected to keep the problem under wraps for fear of doing damage to their credibility.
Most affected investors, from the middle to upper-income bracket, were offered lucrative investment products by the banks' wealth management divisions under complicated contracts.
Citibank Indonesia corporate affair head Ditta Amahorseya declined to comment on the issue, but promised to explain the Lehman exposure Tuesday.
"I think some banks that are exposed to Lehman do not want to disclose themselves," said Nico Omer Jonckheere, Valbury Asia Futures vice president of research and analysis.
The Indonesian unit of UK-based Standard Chartered admitted there were several local investors whose investments had been exposed to Lehman assets. However, the bank refused to disclose whether they suffered any losses.
"I can assure you we are putting consumer protection as our top priority," said Lani Darmawan, Standard Chartered head of consumer banking.
Swiss-based UBS said its direct and counterparty exposures to Lehman would not exceed $300 million globally, because it had taken several measures to prevent possible backlash from other financial institutions, according to UBS Singapore spokesman Julie Yeo.
Danareksa Research Institute chief researcher Purbaya Yudhi Sadewa said some local investors were definitely suffering losses due to Lehman's bankruptcy, especially those receiving high returns.
"Well, it's high risk, high gain," Purbaya said.
He suggested investors to put their money in safer portfolios, such as government bonds, for instance, and carefully read the terms and conditions before deciding to invest in higher-risk products.
