Unexpected Fed move on QE likely to bring funds back to bond, stock markets
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The Thai Bond Market Association expects foreign capital to flow into both bond and stock markets after the US Federal Reserve unexpectedly refrained from cutting its quantitative-easing (QE) programme.
ThaiBMA executive Suchart Thanathitiphan expects the Federal Open Market Committee’s decision to continue monthly bond purchases at US$85 billion (Bt272 trillion) to boost investors’ appetites to return to the bond and stock markets.
He said the Stock Exchange of Thailand now looked more attractive, given its recent sharp drops and yesterday’s sharp rebound.
The SET Index yesterday surged 49.93 points to close at 1,489.06.
The Thai bond market stayed relatively steady. September’s bond yields inched down 0.01-0.02 of a percentage point on average.
“Short-term capital, which recently moved out, could come in, although it may not be as large as in the previous period. It’s because QE reduction is expected in the future,” Suchart said, expressing less concern over foreign-capital inflow.
The Thai bond market recorded net inflow of Bt15 billion from September 1-17. Of the Bt20-billion net purchase, about Bt18 billion went to short-term bonds and the remaining Bt2 billion for long-term bonds.
About Bt5 billion worth of bonds reached maturity.
Since the beginning of the year, foreign capital worth about Bt5 billion flocked to the Thai bond market. Of the total, about Bt333 billion was as net purchases (Bt237 billion for short-term bonds and Bt96 billion for long-term bonds), while about Bt328 billion of bonds matured.
Net foreign holding of bonds is currently at Bt714 billion. Of the total, about 19 per cent is for short-term bonds and 81 per cent for long-term bonds. The figure was about Bt710 billion at the end of 2012.
“The short-term bonds currently remain at about Bt133 billion and about Bt10 billion per month will mature. This is normal. We have to keep an eye on new money,” he said, expecting the new amount would be less than the earlier round.
Krungsri Asset Management’s senior analyst said the Fed announcement was quite unexpected. The FOMC said on Wednesday that it wanted to see more evidence of economic recovery before tapering the monthly bond purchases.
There could be a clearer signal from the Fed late this year before the end of chairman Ben Bernanke’s term in early 2014, he said.
Given that Thai exports could be affected by global uncertainties, including the US economic situation, the Thai economy is now expected to grow by less than 3 per cent, he said.
Krungsri Group estimates Thai economic growth at 3.3-3.8 per cent for 2013, while Krungsri Asset Management projects 3.5 per cent.
