Foreign investors flee Thai bonds

Thai Bond Market Association (ThaiBMA) president Nattapol Chavalitcheevin said foreign investors' holdings accounted for only 1 per cent of total outstanding bonds, a vastly different figure to that in a developed bond market like the US, where foreign holdings take up to 25 per cent of the market.

"The decrease in foreign holdings is also because some bonds matured," Nattapol said. "We cannot trace where the money went when the foreign investors left the bond market."

However, he said bond yields of every maturity had now returned to a normal level following distortion earlier this year, when short-term bond yields rose to a similar level as long-term bonds.

Last month's average outright daily trading volume was Bt34.21 billion, compared with Bt33.67 billion last December. The value of outstanding bonds in the first half of this year was Bt4.35 trillion, compared with Bt3.95 trillion at the end of last year.

The association expects the corporate sector will issue more debentures in the second half of the year, while the Bank of Thailand (BOT), which dominated bond issues in the first half, will decrease its bond-issue rate.

In the first half of the year, bonds worth Bt2.89 trillion were issued, up 114 per cent from the Bt1.35 trillion issued in the same period last year.

State agencies, including the BOT and the Financial Institutions Development Fund, issued bonds worth Bt1.82 trillion.

"The central bank won't have to bear as much pressure from the currency as it did early this year, so it's likely the number of bonds issued by the BOT will decrease," Nattapol said.

The ThaiBMA expects that new bond issues in the second half will be worth about Bt1.8 trillion and that state agencies will still dominate the market. However, corporate debenture issues are expected to improve, from Bt67.39 billion in the first half of the year to Bt99.62 billion.

The association believes interest rates could be a little lower or will maintain their current level.

Meanwhile, the association has announced it will stage the ThaiBMA Bond Star Challenge. Both undergraduate and graduate university students from anywhere in the country are eligible. They will make up teams of three to five members each with one adviser and trade on a simulated bond market. Applications are open until August 25.

Piyarat Setthasiriphaiboon

The Nation