Tuesday, August 11, 2020

BOT warns against panic sales of bond investment units 

Mar 27. 2020
Vachira Arromdee, Bank of Thailand's assistant governor.
Vachira Arromdee, Bank of Thailand's assistant governor.
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By The Nation

The Bank of Thailand has urged investors not to panic sell their investment units in bond mutual funds as returns are usually low during a market sell-off.

Vachira Arromdee, assistant governor, assured the bond market that central bank’s loans were adequate for mutual fund managers seeking liquidity via commercial banks.

She said bond investors should not rush to redeem their investment during a sell-off , given the very low rate of return.

Her comment came after TMBAM Eastspring announced on Thursday (March 26) that it had closed down two mutual funds, Thana Permpoon and Thana Paiboon, to avoid further losses to the investment of unit-holders.

The central bank launched its mutual fund liquidity facility (MFLF) on Sunday and promised to inject more than Bt1 trillion into the bond market if needed. The facility covers money market funds and daily fixed-income funds, thus its coverage extends to all bond mutual funds, she said, adding that fund managers could utilise this facility via commercial banks.

She also reassured investors that investment management companies had adequate collaterals for seeking loans under the facility from commercial banks. The central bank, she said , stands ready to provide loans to boost the confidence of investors while impact from closures of the two funds would be contained. 

The central bank had started to provide loans but found few applicants, suggesting the market situation has already improved, she said.  

Earlier, the Asian Development Bank said that local currency bonds in emerging Asia were facing liquidity problem as investors were concerned over impact of the Covid-19 pandemic.

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