Thai BMA expects rise in corporate bond issues this year

Bandid Nijathaworn, ThaiBMA’s chairman, said the prediction was based on a survey of bond underwriters and dealers. Companies specialising in property, construction and electronic components may want to raise funds for reconstruction after the disaster.

About Bt800 billion in government bonds is expected to be issued this year to compensate for the country’s annual budget deficit and Bt350 billion for infrastructure investment.

The Bank of Thailand’s Monetary Policy Committee (MPC) has been cutting the policy rate since November to stimulate the flood-hit economy after rate rises since December 2010 and a rate pause in October 2011.

At the MPC meeting last month, the policy rate was cut to 3.00 per cent and is expected to be reduced further this year, depending on the speed of Thailand’s economic recovery, Bandid said.

Foreign investment in the Thai bond market is expected to increase in the second half of the year as money is shifted into Asia after the US economic problems and the European debt crisis ease.

As of the end of December, foreign investors’ holdings were Bt420.68 billion or 6 per cent of the Bt7.11-trillion outstanding bonds. Of the total foreign holdings, 28 per cent were in short-term BOT bonds, and the rest in long-term government bonds.

Niwat Kanjanaphoomin, ThaiBMA’s president, said the new bond issues might have longer maturity than last year, which saw short-term maturity due to the upward trend of interest rates.

Last year’s corporate-bond maturity averaged 2.6 years. Already this year, Kasikornbank has announced Bt22-billion bonds with 10-year maturity.

The planned government bonds may be issued as savings bonds and promissory notes rather than long-term bonds, Niwat said.

He added that under its Thai bond market development plan, ThaiBMA would need to solve the liquidity problem in the secondary bond market due to several tranches of government bonds. Such multiple tranches may need to be combined into one large one if the government issues bonds in the future.

The association will stimulate companies, particularly listed ones, to issue more corporate bonds. Currently, only 70-80 of the more than 500 listed companies have raised funds through the bond market.

The 15-per-cent withholding tax levied on capital gains of bonds is also being discussed between the association and the Revenue Department, Niwat said. Malaysia and Indonesia exempt capital gains on bonds from withholding tax.

In 2011, outstanding short-term corporate bonds totalled Bt128.67 billion, up 50.21 per cent, while outstanding long-term corporate bonds amounted to Bt1.15 trillion, up 4.64 per cent over the previous year. Last year’s average daily outright trading value was Bt72.06 billion, up 5 per cent.