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20 Dec 2010

Financial Markets

Thai Bond Market Outlook on the Year of Rabbit: Benefiting Issuers, Adding More Alternatives for Savers (Business Brief No.3007)

During 2010, many factors affect movements of Thailand financial markets, including the bond market. Investment demand from both Thai and foreign investors has limited the incremental of bond yields, keeping unchanged or recording attractive increases during the year, especially in 4Q10. Meanwhile, the size of bonds issued by government in 2010 is quite close to last year, though the corporate bond issuance dropped.
As for 2011 outlook, KResearch perceives that uncontrollable external factors may affect the Thai bond market ,thereby leading to greater fluctuation in yield movements. Although the new buying volume of Thai bonds by foreign investors may not be as high as that of in 2010 due to a more complex economic situation in major economies globally, the bond market will likely receive support from continued growth momentum of Thai economy (albeit at a deceleration pace) and its sound stability. Such conditions should remain favorable for private sector's fundraising. Thus, we perceive that government and private sector's demand for financing will increase. Although the yields in 2011 still in an upward trend in line with the gradual normalization of the BOT key policy rate to stabilize the economy and inflation, the increase of the yields are expected to increase at “a gradual pace”.

In addition, investment demand coming from retail investors remain high as returns from bonds are expected to maintain their attractiveness, compared to bank deposits that yield lower returns, thus helping increase the popularity of corporate bond of businesses with solid financial position and good credit ratings. Most companies are likely to be able to raise capital at reasonable costs. It is expected that the overall corporate bond issuance value in 2011 may be close to, or higher than THB280-300 billion, against the THB260-270 billion in 2010. Bond issuers may come from many key industries of Thailand, e.g., energy and petrochemical business, as well as financial institutions, so this may be a good opportunity for savers or retail investors to diversify their investments.

Financial Markets