The Finance Ministry’s plan to slap a 15-per-cent withholding tax on foreign investors’ bond trading would not badly affect the market, Thai Bond Market Association president Niwat Kanjanaphoomin said yesterday.

He said the measure would raise investment costs and could lead to a drop in trading volume from foreign investors, but if it were only for the short term, the scale of the impact would be small.

According to the association, in the first nine months of the year foreigners were net buyers of Thai bonds, excluding Bank of Thailand issues, to the tune of Bt120 billion, representing a 13-per-cent increase from the same period last year.

“Foreign investors focused on buying bonds, especially long-term ones with a maturity period of more than 10 years because of the highest returns, while short-term bonds of less than one year give fixed returns,” said Niwat.

Ariya Tiranaprakij, executive vice president of the association, said foreign investors might underweight their investment in Thailand as a result of the measure.

via Short-term effect of bond withholding tax only small: TBMA.

Finance Minister Korn said in an e-mailed response to questions yesterday that details of any new measures would be available after the cabinet meeting. Overseas investors poured a net $1.1 billion into Thai bonds this month after pumping a net $4.9 billion in the third quarter, Thai Bond Market Association data show.

Government bonds rose, snapping a two-day slide. The yield on the 3.625 percent debt maturing in May 2015 fell nine basis points to 2.619 percent. The rate yesterday advanced the most in five months.