Hong Kong investors protested outside DBS's main office yesterday before marching to the Singapore consulate general, demanding that the government investigate the bank's marketing tactics, local television reported.

"The credit event redemption amount for the notes has been calculated to zero, and therefore no amounts are due and payable to the holders of the notes," DBS said in the notice. In Singapore, the bank said it calculated the value based on bids from five independent dealers.

Lehman's bankruptcy on Sept 15 sparked protests by investors in Hong Kong and Singapore, seeking compensation for the products sold by DBS and other financial services companies. DBS said in a statement on Oct 22 that the possibility of the 4,700 investors losing their entire investment "is likely to materialize".

The bank started compensating investors last week in cases where it said its own standards were not upheld.

DBS Group Holdings Ltd, which had pledged to compensate some investors who lost money on $241-million worth of structured notes linked to failed Lehman Brothers Holdings Inc, now says that most of the securities are worthless.

The Singapore-based bank, Southeast Asia's biggest by assets, notified Hong Kong investors that the securities it arranged would be redeemed by around Friday, while the redemption for notes sold in Singapore is expected around Monday, according to statements on the lender's Hong Kong and Singapore websites.

Refund demands by individual investors in Hong Kong, Singapore and Taiwan from banks that sold structured notes related to Lehman have prompted some analysts to warn that earnings may be hurt.

"I don't think investors will accept that the notes are worthless," said Kenny Tang, a director at Tung Tai Securities in Hong Kong. "In the next year or two, banks will need to find another way, other than selling these kinds of products, to boost their non-interest income."

The structured notes, offered by an offshore issuing vehicle called Constellation Investment, are similar to minibonds, which are notes arranged by Lehman and linked to the debt of companies such as DBS, Hutchison Whampoa, Swire Pacific, Sun Hung Kai Properties, Goldman Sachs Group and Morgan Stanley.

Bloomberg

(HK Edition 10/30/2008 page2)