Thailand’s corporate bond market is set for a surge of activity following recent interest rate cuts and amid growing appetite for mergers and acquisitions among Thai companies, says FT blog BeyondBrics.
New corporate bond issues are likely to reach between Bt250bn ($8.1bn) and Bt300bn this year, up as much as 40 per cent from Bt212bn in 2011, according to the Thai Bond Market Association (ThaiBMA).
The figures are based on the ThaiBMA’s latest survey of 15 top bond underwriters and dealers in the country, including HSBC, Citibank and Bangkok Bank.
The surge in bond issuance highlights the country’s resilience in bouncing back from political turbulence in 2010 and the flood crisis in 2011 which damaged factories, housing and infrastructure in central and northeast Thailand. Recent government commitments to spend at least Bt350bn on strengthening infrastructure and flood defences have also helped restore some investor confidence.
Down to 3% since Jan. 25
On January 25, the monetary committee of Bank of Thailand assessed that the downside risks to growth has increased due to protracted weaknesses in the global economy as well as a post-flood recovery process of the Thai economy that will be more drawn out than expected. With upside risks to inflation contained, monetary policy could be eased further to help accelerate the return of economic activity to normal levels, especially as private sector confidence, albeit improving, continues to be fragile.
The MPC therefore voted unanimously to reduce the policy rate by 0.25 percent, from 3.25 percent to 3.00 percent per annum.
The impact of the floods on the Thai economy was greater than previously anticipated, leading to a sharp contraction in economic activity in the last quarter of 2011. Although the recovery process in the manufacturing sector has already begun, the restoration of
production to normal capacity is expected to be more prolonged than previously assessed.
The delay reflects the greater severity of damages, which would take more time to repair and also require more extensive replacement of machineries, as well as the drawn-out damage assessment process in claiming insurance payouts. Exports decelerated on the back of floodinduced supply chain disruption and the softening global economy.
Nonetheless, improving consumer confidence, government stimulus measures, and accommodative monetary conditions would help support the revival of private consumption.