IT'S not often that so-called mum-and-dad investors flex their muscles to show that they do matter to the big institutions that take them for granted, but it happened this week.

It was the rush by such investors for OCBC Bank's preference shares that allowed the bank to close the placement tranche of its $1 billion offer within a day. It was three times oversubscribed.

One trader said the scene at some bank branches resembled a 'reverse bank run', with housewives and elegantly-dressed tai tais jostling to put in their subscriptions before the noon deadline yesterday.

And why not? OCBC is offering a bond-like instrument known as preference shares that pay a dividend of 5.1 per cent, well above the paltry interest paid on fixed deposits.

Some bankers said, however, that the bank turned to the mass market to raise funds only after failing to whet the appetites of institutional investors.

There seems to be little truth in that, but OCBC must surely be glad that it did include retail investors in its offer.

Besides getting a better pricing for the preference shares issue - and delivering a massive cash infusion to bolster the bank's capital base - it has also attracted a horde of fresh customers into its fold.

This is because OCBC opened the offering not only to existing customers, but to anyone who walked into a branch with at least $20,000 to spare.

Trawling the net to catch a thousand small fish in this manner may be well worth the hassle, as these fresh customers may become significant clients down the track.

The bank had targeted the type of customers it wants - well-heeled individuals with nest eggs - and secured vital information like employment details and contact numbers.

This surely beats the approach taken by DBS Bank, which attracted much flak by shutting out retail investors altogether, when it raised $1.5 billion from big insurance firms and institutional funds three weeks ago.

However, some bankers have raised concerns as to whether these smaller investors know what they are getting into.

Preference shares are risky because they rank below bank deposits and other debts in priority of payment if a bank goes bust.

Retired stockbroker Narayana Narayana noted, however, that such an argument ignored a basic fact that both DBS and OCBC are 'proxies' for the economy, given their reach to almost every home and business in Singapore.

'Were DBS or OCBC to skip even a single interest payment, what would be the repercussions and possibly the state of our economy?' he asked.

And the notion that retail investors do not understand preference shares appears flimsy as well.

'If accepted as true, it can only be a sad reflection on the lack of sophistication and market knowledge of Singapore investors, as well as the efforts made to educate them over the years,' he said.

More likely, the red-hot response to the OCBC offer reflects the great faith retail investors have in the soundness of Singapore's financial system, a strong Singapore dollar and the ability of the Government to keep inflation under control.

They have, after all, willingly agreed to part with a sizeable chunk of cash and leave it locked up for at least five years, confident that their investments would not suddenly evaporate.

So, surely we should give credit to retail investors for their ability to make prudent investment decisions when they are given the choice.

engyeow@sph.com.sg