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30 Dec 2011

Financial Markets

Thai Bond Market, 2012: Risks Affecting Private Sector Bonds (Business Brief No.3229)

In 2011, numerous risks have affected the domestic equity and money markets, especially private sector bonds. Regarding the outlook for 2012, although the volume of private sector bonds due for maturity will be twice that seen in 2011, the value of those to be issued will probably decline to around THB300 billion, against THB340 billion in 2011, because fund raising to support new investment will be limited in some sectors, especially those most affected by the flooding and global economic risks. Included in that group would be energy and food industries. Real estate firms may issue more bonds in 2012, though their performance may not be as robust as seen a few years ago. As more Thai companies plan investments abroad, it is expected that fund raising via foreign currency-denominated bonds will gain greater momentum this year.
It is expected that the Thai bond market and fund raising by the private sector, in general, will face several risks ahead. Among them would be:
1) The BOT key policy rate that may reverse its current bearish trend (due to rising inflation on government plans to bolster consumer disposable income).
2) Larger than expected supplies of government bonds.
3) Economic risks that may cause the government to miss their income targets, thus risking budgetary deficits.
4) Volatile foreign capital movements may ensue (amid the lingering EU debt crisis and global economic slowdown), limiting investments compared to the substantial sums seen entering the Thai bond market 1-2 years ago.

Given the above risks, it is expected that yields in the secondary market, as well as fund-raising in the primary market, will doubtless be affected.

Financial Markets