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Decline in foreign outflows from bond market

Foreign capital outflows from the Thai bond market declined for the first four months of this year, while Bt26.4 billion net flew into bonds in April, prompting the amount of bonds held by foreigners to touch Bt706 billion on less concerns over US quantitative easing.

Ariya Tiranaprakij, deputy managing director of ThaiBMA, said in April net capital inflow into Thai bonds totalled Bt26.44 billion.

Of the amount, she said the net buy for short-term bonds was Bt37.3 billion and the net buy for long-term bonds was Bt6.45 billion. The matured bond figure was Bt17.3 billion.

Foreign capital outflows eased, with a clear sign of inflows from the middle of March to April. In the first four months of this year, net capital outflow was Bt2.2 billion.

Of this amount, the net buy for short-term bonds was Bt73,000, she said, adding net sales for long-term bonds was Bt26 billion and Bt49.2 billion for matured bonds.

Currently, foreigners held Bt705.67 billion in bonds. Of that total, about 17 per cent were short-term bonds and 83 per cent long-term bonds.

"Buying has been seen in the bond market from both foreign and local investors. That has led to a drop of 0.01-0.03 percentage point on average, due partly to easing concerns on the QE, which came as expected. The US rate may not rise soon," she said.

Ariya said external factors started to stabilise and internally there was less supply of bonds.

Despite this year's expected bond supply of Bt500 billion, which is close to last year's figure, there was no auction for three- and five-year bonds, which were usually used as references in May.

With relatively high demand and a downward trend for domestic interest rates, private companies' new debenture issues doubled year on year to Bt199.54 billion for the first four months of this year. In April, private companies' new debenture issues totalled Bt68.8 billion.

Ariya said in the first four months, new government bond issues fell 35 per cent year on year to Bt137 billion due possibly to a large amount of treasury balance and no financial plan.

If a new government is not formed, the financial plan may not be certain and that could lead to no new long-term government bonds being issued. Financial negotiable notes were mostly issued.

"If the political situation is prolonged and that leads to the Thai economic slowdown, the chances for a [interest] rate rise is small. There may be a need for a rate cut to prop up the economy," she said.

"And it will be positive to the bond market as capital will flow in for investment."

Private companies will also launch more issues of debentures, thanks to lower borrowing costs, she added.

She said political violence would be a negative factor.


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