By The Nation
Sakda Pongcharoenyong, president of Tris Rating, said that Thai-listed companies possess the financial strength to deal with possible risks, as seen in their earnings results following the Thai economic expansion.
Most of the companies are free of liquidity crunch and cash-flow problems, given their ability to obtain bank borrowings and raise capital through the bond market.
However, the business sector should be well-prepared for higher borrowing costs in light of the uptrend in interest rates amid consistent signs of a global economic recovery, he said.
The United States has gradually raised the Fed funds rate since late 2015 and this year Federal Reserve is expected to hike the rate twice or three times. The Fed has already increased the policy rate once to 1.50-1.75 per cent this year.
After the US rate hike, other countries, particularly emerging economies with rapid expansion, followed suit in an effort to keep foreign capital in their countries instead of moving back to the US.
The policy rates are the benchmark for money-market rates which are regarded as the borrowing costs for the business sector.
As the rise in interest rates continued, bond yields increased in the past two months. The Thai government bond yield has risen 30 basis points on average, prompting investors to slow down their investments and adopt a wait-and-see attitude for the rate to stabilise.
Basically, markets have been making corrections and investors should be on the sideline for one to two months as a number of bond issues will be launched. If demand drops, yields are expected to accelerate to attract investors.
"Increased yields have prompted less demand which have waited to see interest rates to be steady but this could be short term. It does not mean all-time slowdown. Next month, a lot of bond issues will be launched and we have to wait to see how much demand is," he said.
Although the private sector's costs will increase in line with trends for interest rates and crude prices, he said, but believing that business operations will not be highly affected as most companies are well-prepared for higher costs.
In the past two to three years, large-sized companies have launched a number of debentures, given their expectations for interest rate upward trend. Increased crude prices have been seen to affect some businesses.
Thai business sector are stronger in terms of capital, resources and human resources to be able to cope with possible business risks and open for business opportunities in light of growing Thai economy, Sakda said.
He expected the Thai economy to expand in the rest of this year, driven by internal and external factors.
"Increased cost may affect businesses by sector. There has not been any concerns for the overall businesses. Only the agriculture have been affected by low prices," he said.
On another front, Thai bourse have been confronting block trade.
Sutthisit Jamdee, assistant managing director of Kasikorn Securities, block trade volume in Thailand Futures Exchange has increased to Bt50 billion this year from Bt20-Bt30 billion, given entries of foreign securities from Singapore and the US into Thailand.
Now, there are 10 players for block trade services from the previous's five local players.
More challenges will exist for block trade with TFEX's new regulations which will allow more stocks for the transactions. According to the previous regulations, block trade could be made in stocks in SET100 only.
Sutthisit said that Kasikorn Securities has focused on risk management and faster transactions for customers. Customers will easily move in and out with brokerage-house safety.