If approved, the Stock Exchange of Thailand will provide Bt50 million through the BEX as seed investments in five ABF Thailand Bond Index RMFs that five mutual fund companies will manage.

The five mutual funds can also raise capital from the public, in addition to the SET's contribution, said Santi Kiranand, chief executive of the BEX. The soon-to-be-set up funds will help boost liquidity for the ABF Thailand Bond Index Fund, he said.

"The Bond Index Fund was listed on the BEX late last year but there's very thin trading. The BEX and Kasikorn Asset Management, the index fund's manager, are studying the possibility of RMFs. If it goes through, each asset company will receive Bt10 million to set up an RMF," he said.

The BEX sees daily trading volume of Bt130 million-Bt150 million, accounting for less than 2 per cent of the overall trading volume in the debt market, but it expects more than Bt10 billion to be injected by the private sector

after the political chaos calms down.

Santi said the focus during the rest of this year would be on interest rates and the political situation. Since rates seem likely to stabilise, the main concern is the direction of local politics.

So far this year, hardly any debentures have been issued by the private sector, he said. The growth in the debt market from Bt3.1 trillion last year to Bt3.3 trillion last month was mostly due to new bonds issued by the public sector.

The exchange hopes to boost the size of the overall debt market to the equivalent of 80 per cent of gross domestic product in five years and is counting on the private sector to channel more investments.

"Currently the total debt outstanding in the market represents 43 per cent of GDP with some Bt800 billion of debentures from the private sector," Santi said. "In order to achieve our target, the private sector must contribute Bt3.2 trillion more. The government sector may not be able to issue so many bonds in the future as the public debt is already at a high level."

The BEX plans to encourage the private sector to adopt the use of securitised debentures as financing vehicles.

"We've talked with some banks to devise a solution together. Companies that want to raise less than Bt1 billion should take out loans from banks.

"It's best for both banks and investors to try securitisations if the credit is more than Bt1 billion," he said.

Piyarat Setthasiriphaiboon

The Nation