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Corporate debt market in Thailand well positioned for further growth

Brazil, China, South Africa and Thailand are best-placed for corporate debt market growth says Moody’s Investors Service in a report that analyzed trends in 35 emerging markets.

Olivier Languepin

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Corporate debt markets in Brazil (Ba2 stable), China (A1 stable), South Africa (Baa3 negative) and Thailand (Baa1 positive) are best-placed to achieve further growth in the coming years, Moody’s Investors Service said today in a report that analyzed trends in 35 emerging markets.

·         Study of 35 EMs highlights the key factors for growth of domestic corporate bond markets

These four countries registered the biggest increase in the ratio of mutual funds and insurance investment portfolio assets to GDP between 2010 and 2016, improving their ability to withstand future financial shocks.

“The development of corporate bond markets provides companies with an alternative source of funding beyond bank lending. This can help to mitigate declines in real economic activity from credit disruptions associated with a banking crisis.”

Ruosha Li, a Moody’s AVP-Analyst and the report’s co-author

The level of industrialisation in an the economy tends to drive the development of capital markets and results in a need for more capital funding. Countries that are highly reliant on commodity exports often show less progress in industrialisation and are less likely to require as much access to corporate bond market for funding.

Thailand have the most developed domestic corporate bond market among emerging markets
Brazil, China, Malaysia, South Africa and Thailand have the most developed domestic corporate bond market among emerging markets

The report highlighted the three key factors that help to foster the growth of domestic corporate bond markets: firstly, an increase in the assets under management of domestic mutual funds. Secondly, the growth of insurance companies’ investment portfolios; and lastly, a reliable regulatory regime.

In some cases, the level of the country’s public debt, the size of its domestic equity market and the amount of bank lending to companies also have implications for corporate bond market growth.

Highlights of Thai Bond Market 2018

Total outstanding value of Thai bond market at the end of 2018 surpassed THB 13 trillion for the first time, rising 12% from last year.

Long term corporate bond issuance hit new record high for three consecutive years, reaching THB 879 billion.

Green bond was first issued in Thailand.

Non-resident investor holding of Thai bond reached new all-time high and touched trillion-level to THB 1.002 trillion in November 2018.

For the first time, since the early of the year 10-year Thai government bond yield has declined to stay below 10-year US Treasury yield until now.

The Securities and Exchange Commission of Thailand (SEC) amended regulations effective from April 2018 to tighten selling of bill of exchange (BE) to enhance investor protection

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Thailand’s Banking Outlook changed to negative (Moody’s)

Moody’s has changed the outlook for Thailand’s banking system to negative from positive as coronavirus outbreak hurts asset quality and profitability

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Moody’s has changed the outlook for Thailand’s banking system to negative from positive. The operating environment for the country’s banks will deteriorate in the next 12-18 months due to disruptions from the coronavirus outbreak, and this will lead to a weakening of banks’ asset quality and profitability.

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Thai Banks launch packages for clients affected by COVID-19

Commercial banks in Thailand have offered refinancing services to some 30,000 clients, worth 234 billion baht in total.

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Thailand raises threshold to 1 million US dollars for repatriation

In a bid to lessen pressure on the Thai baht, the Bank of Thailand has increased to $1M the limit for foreign funds that do not need to be repatriated

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The Bank of Thailand has relaxed foreign exchange regulations by increasing the threshold for proceeds that do not need to be repatriated from current $200,000 to USD 1,000,000 .

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