Euro crisis expected to spur inflows

Chakkrit Parapuntakul, director-general of the office, said yesterday that Standard & Poor’s, an international rating agency, would further downgrade the creditworthiness of many countries in Europe.
Investors will not have opportunities to deal in Europe or the United States, he said.
Thailand, among other countries in this region, stands to gain from the next wave of capital flows.
Foreign investors have plenty of room to expand in the Thai bond market, as they hold only 9 per cent of local bonds here. That should be more like about 15 per cent, he said.
However, new flows depend on many factors including the credit rating of each firm and the risk management of investors, he said.
The Finance Ministry and the Bank of Thailand have dominated the domestic bond market, accounting for 75 per cent of bonds issued. The appropriate ratio should be 50 per cent for government bonds and 50 per cent for corporate bonds, Chakkrit said.
The office will try to encourage firms to sell more debt instruments.
The Finance Ministry plans to raise funds by issuing bonds worth Bt800 billion in fiscal 2012. These will comprise both short- and long-term bonds.
“We plan to issue Bt800 billion worth of bonds but market demand is as high as Bt1.2 trillion,” Chakkrit said.
Active investors are life-insurance companies, the Social Security Fund and the Government Pension Fund. These institutions want to subscribe to 10-year, 20-year, 30-year and 50-year bonds, he added.
Many analysts are worried that short-term capital flows, both in and out, could pose a threat to the local economy by destabilising the exchange rate and hurting confidence.