Net holdings of government bonds by foreign funds are forecast to reach Bt130 billion, while the issue of corporate bonds is expected to increase during the rest of the year, the Thai Bond Market Association (Thai BMA) said.
"The net holding of government bonds by foreign investors this year is as high as in the years before the Bank of Thailand announced the 30 per cent capital-control policy on September 19, 2006," said Niwat Kanjanaphoomin, president of Thai BMA.
Net holding in government bonds by foreign funds increased from between Bt40 billion and Bt50 billion last year to Bt90 billion in the first half this year. It is expected to reach Bt130 billion in 2010.
Issuance of government bonds has been increased to finance economic stimulus packages.
Overall, issuance of new bonds dropped by 15 per cent to Bt5.07 trillion in the first half of this year from Bt6 trillion in the same period last year. The exception was government bonds, which increased 10 per cent, from Bt197 billion to Bt218 billion.
Niwat added that the investment in government bonds was fresh capital that shifted from the Thai bourse in February to March. Previously, foreign net sell in the Stock Exchange of Thailand reached only Bt23 billion so that they have to explore other source to ensure higher yield.
"The foreign funds have continued investing in government bonds in Asia, including Thailand, to reduce risks after financial crises in the US and European Union," Niwat said.
Ariya Tiranaprakij, executive vice-president of Thai BMA, said corporate bonds' fund mobilisation had dropped from Bt214 billion early last year to Bt167 billion, a decrease of 27 22 per cent.
Last year, the total value of corporate bonds reached Bt389 billion.
The drop in corporate bonds derived from low issuance of debentures by energy companies, accounting for 12 per cent of total bond value. Previously, they achieved 50 per cent of the total value as the Map Ta Phut Industrial Estate problem has not been clearly solved.
Since early this year, the issuance of corporate bonds has mainly come from financial institutions, accounting for 50 per cent of total bond value. It is expected that private companies will issue more bonds after they foresee a clearer upward trend of the policy rate.
Ariya said the continued growth of Thailand's economy had increased capital demand by manufacturers, particularly big companies.
It is forecast that the total value of corporate bond issues so far this year will exceed the target of Bt250 billion. However, the full-year total will likely remain unchanged from last year's figure.
As the newly appointed president of TBM, Niwat said he would focus on the Self Regulatory Organisation and Bond Information Centre to allow issuers and investors to access more information.
On the debt-market development side, Thai BMA will set up a user advisory group, which will consist of people concerned with debt instruments, issuer and investors, to allow them to brainstorm on removing obstacles to investment in both the primary and secondary markets.