Investors likely to turn toward bonds

Larger-sized firms who want to secure a low rate are expected to issue more debentures apart from raising loans, and become attractive for investors who are looking for higher returns than other instruments.
An executive at Krung Thai Bank (KTB) pointed out that the trend of lower interest rates would benefit the sale of debentures, while lower deposit protection of Bt1 million per bank per account might not attract investors much. This will make corporate bonds the instrument of choice for investors.
Bills of exchange (B/E) used to be attractive, however, the unclear picture on fee collection would make investors look at other instruments.
Piti Tantakasem, chief wholesale banking officer of TMB Bank, added that amidst the global economic uncertainty, investors should screen their investments, adding the good credit rating of a corporate bond does not necessarily mean that it is good for investment.
A credit rating of bond issuer who has more investment in European countries with B rating of bond issuer who rely on domestic, the investors should weight what the debenture that they should invest, he suggested.
Arthid Nanthawithaya, senior executive vice-president of Siam Commercial Bank, said the bank this year would focus on how to help customers handle the risks because the economy could be volatile this year.
He said that if the interest rates are stable, the number of corporate bond offerings this year would remain high and SCB aims to remain the market leader as underwriter of corporate bonds.
The Thai Bond market Association earlier projected that the bond market this year would be worth Bt7.6 trillion. Corporate bond offerings are expected to jump to Bt300 billion from Bt220 billion last year.
Some bonds could not be sold last year due to the floods, therefore they will be issued this year, including bonds by giant conglomerate PTT.
PTT yesterday offered random debentures for Bt4 billion, which were fully subscribed. The debentures offered a fixed interest rate at 3.8 per cent per annum for a period of 3 years 9 months, and interest rate at 4 per cent per annum for the fourth year while the fifth and sixth years offered a coupon of 4.40 per cent per annum.
Charnsak Fuengfu, executive vice president of Bangkok Bank, said that corporate firms have to diversify their sources of funds. Besides loans, debentures are an attractive choice for them.
Most bond issuers are large-sized companies such as PTT, Banpu rather than medium corporates as larger-sized companies can manage risks better.
However, Bangkok Bank believes corporate firms require loans after seeing greater capital expenditure by several companies.
Export, agriculture and energy are three sectors that require loans, while some companies plan to invest overseas, said Charnsak.
Corporate loans at Bangkok Bank this year should grow no less than last year at 17 per cent.
Piti of TMB added that medium corporate customers with annual sales of between Bt500 million to Bt5 billion are expected to require financial loans, especially working capital.
It will expand the portfolio of medium corporate customers to 50 per cent of total wholesale banking in the near future from one-third now.