Govt urged to set up corporate bond guarantee fund to rescue tourism industry
Thailand needs to set up a corporate bond guarantee fund in order to rescue tourism-related industries that have been hit hard by the Covid-19 pandemic, Tada Phutthitada, president of the Thai Bond Market Association (Thai BMA), said on Thursday.
The fund may be set up by the government with a fund size of Bt50 billion, which would enable it to guarantee corporate bonds up to Bt125 billion, or 2.5 times, he said.
Tourism-related industries, such as hotels, could raise funds by issuing bonds with three-year maturity and the guarantee fund will compensate investors when issuers default on payment.
Three years maturity would be enough as tourism is likely to recover from the coronavirus outbreak, he said.
The bond guarantee fund will be similar to Malaysia’s Danajamin, a financial guarantee for bonds and Sukuk issuance. Malaysia has been successful in implementing the bond guarantee fund, supporting businesses to raise funds via issue of bonds and create investor confidence, said Ariya Tiranaprakij, senior executive vice president of Thai BMA.
The Thai government may make use of the Bt400-billion Covid-19 recovery fund, which has been little utilised, she said. Or money could be drawn from the central bank’s Corporate Bond Stabilisation Fund, which has not been utilised much since its launch in April, she said.
Thailand currently has the Thai Credit Guarantee Corporation, but it provides only bank loan guarantee.
In the first nine months this year, companies issued bonds worth Bt540 billion. They are expected to raise funds via bonds for the rest of the year, said Tada, and forecast total corporate bonds worth Bt800 billion for this year.
Outstanding bonds in the first nine months rose 5.09 per cent to Bt14.2 trillion from the end of last year. The issuance of government bonds contributed to the rise of outstanding bonds, but outstanding corporate bonds dropped.
Banks decreased their short-term debenture issuance, while energy firms increased their long-term bond issuance.
Between January and September, foreign investors sold government bonds worth of Bt71.3 billion, comprising Bt64.1 billion short-term bonds and Bt7.3 billion long-term.
Thai bond holdings of foreign investors dropped from Bt916.8 billion to Bt848.8 billion, representing 6 per cent of total outstanding bonds.
Foreign investors are waiting to see the outcome of the US presidential election. They want to see how US election will affect the Thai economy. Thai government bonds remain attractive due to the lower inflation rate relative to those of neighbouring countries, but market uncertainty remains, Tada added.
