Banks fuel growth in bond issuance

Banks are expected to raise funds through bonds because the instrument is less costly than deposit mobilisation, ThaiBMA chairman Bandid Nijathaworn said.
New corporate bond issuance in the first half was Bt245 billion, driven by the banking sector with Bt91.5 billion, or 37 per cent of the total, followed by the energy sector.
Total new bond issuance this year is expected to hit the target of Bt350 billion-Bt400 billion, up from Bt212 billion in 2011, Bandid said. New corporate bond issuance in the first half was Bt245 billion, also driven by the banking sector.
As of June 30, outstanding bonds increased to Bt8.06 trillion from Bt7.11 trillion at the end of last year, up 13 per cent. However, total new bond issuance by the government and private sectors for the first half of this year dropped by 18 per cent to Bt5.6 trillion because of a decrease in the Bank of Thailand’s short-term bond offering.
Government bonds, state agency bonds and new debentures in the first half of this year increased by 57 per cent, 193 per cent and 121 per cent, respectively, in line with the government plan to compensate for the country’s annual budget deficit. The private sector, meanwhile, wants to secure funding during the current low-interest-rate environment.
Bonds in the secondary market in the first half totalled Bt9.85 trillion, up by 4 per cent from the same period last year due mainly to the low interest rates, which attracted investors to long-term bonds, Bandid said.
Foreign investment in the Thai bond market in the first half was Bt600.4 billion, up 64 per cent year on year. About 34.41 per cent of total foreign investment in the Thai bond market is in short-term bonds and 65.27 per cent is in long-term bonds, which benefits the Thai economy.
Niwat Kanjanaphoomin, ThaiBMA president, said foreign investment in the Thai bond market had increased to 12 per cent of the market from 7 per cent at the end of last year. Nevertheless, the ratio in Thailand remains lower than in Malaysia and Indonesia. Those countries boast ratios of 20 per cent and 30 per cent respectively, Niwat said.
ThaiBMA believes there is a strong chance the central bank will cut its policy rate in the second half to counter the impacts of US economic problems and the European debt crisis, Bandid said.