TBMA confirms foreign inflows for speculation

Year-to-date foreign fund inflows to the Thai bond market amount to 79 billion baht, with half the sum investing in shortterm bonds to speculate on baht appreciation, says the Thai Bond Market Association (TBMA).

Such inflows are substantial compared to 200 billion baht worth of foreign inflows into domestic bonds for all of 2017, said TBMA president Tada Phuttitada.

Of the 79 billion baht, half the amount is invested in short-term debt securities, which is different from last year when 80% of foreign inflows were invested in longterm bonds, said Mr Tada.

“Foreign investors have a strategy to invest [in a] shorter [time span] because they are speculating on baht appreciation,” he said.

“If the baht strengthens, [foreign] investors will take a profit and may shift their funds to the stock market [when listed firms record improved net profit], or hold cash for a while if the US interest rate rises.”

The baht traded at 31.83 against the greenback as of press time yesterday. The local currency is hovering near a 3½-year high because of an influx of foreign fund inflows, appreciating by 2.4% year-to-date following a 9% gain in 2017, said Reuters.

The strong baht has caused jitters among Thai exporters as income received from export value has dwindled as a result of foreign exchange loss.

Corporate bonds, meanwhile, still remain attractive for investment this year because the return of Thai debentures is higher than the bank deposit rate and global bond yield, said Mr Tada.

But investment in bills of exchange (B/E) has declined as investors were jolted by a series of B/E defaults last year, he said.

“Newly issued corporate bonds have been sold to high net worth investors at around 90%, which reflects high investment demand,” said Mr Tada.

“Individual investors’ holding of corporate bonds stands at around 30%, considered the highest ratio in bond markets as in others most of the holders are institutional investors.”

Separately, foreign investors remain net sellers in Thailand’s stock market as the net profit of SET-listed firms in 2017 was lower than those of corporates listed on other Asian bourses, said Paiboon Nalinthrangkurn, president at the Investment Analysts Association and chief executive of Tisco Securities.

But foreign investors are expected to return to the Thai bourse when listed firms’ net profits record a recovery, said Mr Paiboon.

“Foreign investors are waiting to invest if listed firms’ net profit rises. Analysts expect listed firms’ net profit to grow by double digits this year,” he said.

The Thai bourse is projected to continue rising over the next two years because of excess liquidity stemming from monetary easing measures implemented by central banks in Japan and the euro zone, said Mr Paiboon.