Value of Thai corporate bond issuance heads for all-time high

Tada Phutthitada, president of the ThaiBMA, said the private sector would use this period of low interest rates to issue bonds in order to lock in funding costs. As there are many firms that have never raised funds by issuing debentures, there are many potential newcomers, and their numbers have been continuously increasing in recent years.

The adoption of Basel III regulations by the Securities and Exchange Commission will also boost the issuance of private bonds since the new rules will increase the cost of borrowing from commercial banks.

“Growth is apparent in both short-term and long-term private bonds, and we believe that this trend will continue in the future, since there are many companies that have never issued bonds to raise fund before,” he said.

Tada said that as of October 15, the private sector had issued corporate bonds worth Bt485.56 billion this year. That exceeded the amount for all of 2013, which was Bt418.46 billion. The ThaiBMA believes that by the end of 2014, the total value of corporate bonds will be close to Bt570 billion, breaking the all-time record of Bt509.37 billion in 2012.

He also said 40 newcomers had issued short-term bonds, which was almost double last year’s number, and 16 newcomers had issued long-term bond in the past nine months. Meanwhile 82 per cent, or 536 of the 654 companies listed on the Stock Exchange of Thailand and the Market for Alternative Investment, have never issued a corporate bond.

The total outstanding value of the Thai bond market at the end of September was Bt9.19 trillion, which represented an increase of 2.2 per cent from Bt8.99 trillion at the end of 2013. Trading value in the secondary bond market has decreased slightly in that nine-month period to Bt79 billion per day from Bt85 billion per day in 2013.

The main reason is the slowdown in bond issuance by the Bank of Thailand.