TBMA upgrades bond issuance outlook to B900bn

The Thai Bond Market Association (TBMA) upgraded its projection for corporate bond issuance this year to 900 billion baht from 700-750 billion as private companies seek to replenish capital reserves amid economic uncertainties, says TBMA president Tada Phutthitada.

The value of corporate bond issuance in the first half stood at 552 billion baht, up 63% compared with the same period last year, with the value in the second half projected to exceed 400 billion.

“The third wave of the pandemic has not affected long-term corporate bonds, with the issuance value steadily increasing each month since April,” Mr Tada said.

He said an increase in government bond issuance will not raise the bond yield or affect corporate bond issuance because the country’s savings rate remains high, allowing it to afford the government bond issuance.

The government bond financing may not even impact the country’s credit rating, said Mr Tada.

“The country’s current credit rating of BBB+ is underrated and it should have been upgraded to an A rating before the Covid-19 crisis because our definition for public debt is significantly stricter than the international definition,” he said.

Thailand’s current public debt ceiling of 60% includes the debt of state enterprises in the real sector, which is not included in the international definition.

Bonds issued by the banking sector increased by 21%, while those issued by the real sector increased by 78% covering most credit ratings in the first half of this year.

Moreover, 33% of corporate bonds issued were placed through a public offering, while 46% were offered to institutional and high net worth investors.

Mr Tada said TBMA monitored the growing portion of individual investors who are holding corporate bonds.

The growing figures suggest investment through intermediaries, which is better in terms of diversification, has declined.

In the first quarter this year, individual investors contributed 35.3% of the total holding value of 3.395 trillion baht, up from 34.8% of a total of 3.396 trillion in the fourth quarter of 2020 and 31.5% of a total of 3.4 trillion in the fourth quarter of 2019.

“We should promote bond investments through mutual funds and financial intermediaries so investors can diversify risk,” he said.

Mr Tada said a distressed asset fund should lead the country’s bond ecosystem as a vehicle that encourages institutional investors to invest in high-yield and investment-grade bonds.

According to TBMA, no bonds have defaulted this year.

However, there have been requests for bond payment extensions for 17 tranches from nine companies as of mid-June this year.

He expects there will be very few debt extensions and the size of extensions will be small, not exceeding 1-2 billion baht this year.

In the first half this year, foreign investors reported net buying of corporate bonds worth 73.4 billion baht.

TBMA expects the government bond yield curve to pick up following a US bond yield rise because the US Federal Reserve signalled a quantitative easing tapering.

“Foreign fund flows may not change in the third quarter, however there may be some foreign outflows in the fourth quarter if there is news regarding the tapering,” said Mr Tada.