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The value of new corporate bonds dropped 14% during the first nine months of this year to 704 billion baht as market conditions were cool to fundraising, with bond issuers waiting for interest rate reductions, according to the Thai Bond Market Association (ThaiBMA).
President Somjin Sornpaisarn said the bond market had a total outstanding value of 17.2 trillion baht, up 3.9% from the end of the previous year, as government-issued debt instruments rose by 600 billion baht. The outstanding value of long-term corporate bonds was 4.7 trillion baht, down 2.8% from the end of the previous year.
Corporate bond issuance fell 14% from nearly 818 billion baht at the end of 2023.
Ariya Tiranaprakit, executive vice-president of ThaiBMA, said new issuance of corporate bonds fell significantly in the first nine months because of a decrease in high-yield bonds, dipping 59% to 39.7 billion baht from 96.3 billion at the end of 2023.
Investment-grade bonds totalled 664 billion baht for the period, down 8% from 723 billion at the end of 2023.
“The reason corporate bonds raised less funds was market conditions were unfavourable, with weak investor confidence for high-yield bonds following defaults by several issuers, especially Energy Absolute [EA], which caught the market off guard,” she said.
In addition, interest rates started to fall overseas, causing companies to delay issuing new bonds. Bond issuers forecast rates are likely to decrease further next year, so they are waiting for the right timing to issue bonds at lower costs, or change to borrowing money from banks instead, said Ms Ariya.
ThaiBMA projects corporate bond issuers will raise 900 billion to 1 trillion baht, with fundraising still on target, she said.
Large companies continued to raise funds by issuing bonds from January to September, mainly at investment grade. The sectors that issued the most were finance and securities, real estate and energy.
The association expects the Bank of Thailand to cut rates by 0.25 percentage points in the last quarter of 2024, said Ms Ariya.
Bond problems such as defaults and payment postponement appear to be improving. In the case of EA, negotiations already took place with bondholders.
“If the company continues to operate, performance improves and the bond is repaid, then confidence in the bond market returns,” she said.
ThaiBMA expects the Thai economy to recover in 2025, and the procurement of low-cost funds and lower bond interest rates provide opportunities for the private sector to use the bond market for fundraising, said Ms Ariya.
The outlook for the bond market in 2025 is expected to be improved from this year, with the value surpassing 1 trillion baht, she said.