Corporate bond issues expected to decline in the fourth quarter
The number of corporate bond issuers this quarter is expected to drop from the past nine months, as many companies might slow down their investment in response to a possible global recession.
Thiti Tantikulanan, head of capital markets at Kasikornbank, said last week that the bank estimates bond issuance in the fourth quarter, excluding banks and Siam Cement Group, would be Bt40 billion, lower than the previous quarters.
SCG would continue issuing debentures this quarter to serve its investors.
Corporations that tap the bond market this quarter must have a real demand for capital and not just want to lower their cost of funds.
It is hard to predict whether the policy interest rate will be cut because the US’ third round of quantitative easing is making investors move into commodities and agricultural products, which will spur inflation. Corporations cannot predict whether the |economic slowdown or infla-|tion will come first. That has a bearing on their decision-making for investment activities, he added.
Ariya Tiranaprakij, executive vice president of the Thai Bond Market Association, said that even though companies would offer fewer bonds this quarter, their demand could climb to Bt455 billion due mainly to the banking industry.
The bond market since the beginning of the fourth quarter was quiet, with only Bt28 billion of bonds entering the market, lower than the past three |quarters. However, Bank of Ayudhya (BAY) and Krungthai Bank (KTB), particularly |BAY, are boosting the new |corporate bond business this quarter. The association had never thought BAY would issue such a huge amount of debentures.
BAY will sell 10-year unsecured subordinated debentures worth Bt20 billion from October 29-November 6. The bonds will carry a coupon rate of 4.65 per cent.
KTB will sell Bt15-billion worth of unsecured subordinated debentures from October 29-November 1 with a coupon rate of 4.6 per cent. KTB has an option to issue additional bonds of up to Bt10 billion.
Thanachart Bank will also offer 10-year subordinated debentures worth Bt2.5 |billion-Bt5 billion, paying 4.7 per cent.
Debenture issuances by banks have reached Bt120 billion so far this year versus Bt18 billion last year. Almost all of the new bank bonds are subordinated debentures, reflecting the industry’s need to ensure their Tier 2 capital complies with Basel III, he added.
Anuwat Luengaweekul, chief financial officer of Thanachart Bank, said the debenture issue this year can get by with offering about 4.5-4.7 per cent compared with 6 per cent in the past few years.
Subordinated debt might not be attractive next year because of Basel III, so several banks agreed to offer this instrument in large amounts this year, he added.
