Foreign investors showing signs of returning to Thai bond market

Foreign investors showing signs of returning to Thai bond market

There are signs foreign capital is returning to the Thai bond market after the National Council for Peace and Order (NCPO) announced its economic road map announcement, according to the Thai Bond Market Association (ThaiBMA).

ThaiBMA executive Suchart Thanathitiphan said that from June 1-6, net purchase of Thai bonds totalled Bt9 billion (S$346 million) of which foreign purchase of long-term bonds amounted to Bt10.56 billion (S$406 million), while sales of short-term bonds amounted to Bt1.6 billion (S$62 million). However, net foreign capital outflow from the Thai bond market was Bt40 million (S$1.5 million) as a result of Bt9 billion bonds maturing.

Since the beginning of this year until now, net foreign capital outflow was Bt70 billion. Net purchase of Thai bonds totalled Bt18 billion. Of the total, purchase of short-term bonds was Bt49 billion, while sales of long-term bonds amounted to Bt31 billion. Matured bonds totalled Bt88.7 billion.

So far, foreign holding of Thai bonds totalled Bt639 billion. Of the total foreign holding, about 12 per cent are short-term and 88 per cent long-term, he said.

Regaining confidence

"Investment has been seen in long-term bonds since June 3 after the NCPO declared its road map. Foreign investors appear to have regained confidence. Foreign investment has been seen in Thai bonds with an average maturity of seven years or two groups of maturities - 3-5 years and 5-10 years," Suchart said.

He also expects more capital to flow into the Thai bond market if the European Central Bank injects liquidity into the system.

Euro carry trade is less expected to prompt foreign capital to flow into Thailand, given the baht may not appreciate to be attractive enough for investment and there is less chance of the Monetary Policy Committee cutting its policy rate. The policy rate is expected to be left unchanged at 2 per cent for the rest of this year.

In June, new debenture issues totalled Bt21 billion. From the beginning of this year until now, new debenture issues raised Bt230 billion.

ThaiBMA targets Bt450 billion being raised through the issue of new debentures in 2014.

"However, as debt instruments worth Bt130 billion will mature during the year our target could be hit," Suchart said.

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