Thailand: Cash crunch fears rise in Thai corporate bond market on pandemic

  • The novel coronavirus pandemic has created uncertainty in the Thai corporate bond market. Sales of bonds issued by the country’s top companies have been slower than before the outbreak, raising fears of a liquidity crunch.
  • This has prompted a challenge for Thai corporates whose THB600bn in bonds are due to mature in 2020, according to the Thai Bond Market Association.
  • So far in 2020, around THB122bn of corporate bonds have been issued by major Thai companies. This compares with THB20.5bn in the same period in 2019.
  • However, the bonds did not receive a warm welcome from investors although their coupon rates were well above Thai commercial banks’ savings rate of around 0.3%. That is a rare phenomenon in the Thai bond market, which has been experiencing average growth of 14% a year.
  • Seven listed companies have recently extended their bond maturity dates by 6 to 24 months.
  • Industry conglomerate Siam Cement in Apr 20 issued a THB25bn bond, rated at A+ and carrying a 2.8% coupon rate. But it took up to a week for the company to sell them all.
  • That was an abnormal phenomenon for investment-grade bonds, which are normally sold out within a few days. PTT Global Chemical also faced the same problem as its THB16.5bn bond faced slow sales.
  • The company issued 10-, 12- and 15-year bonds with AA+ ratings and coupon rates of 2.99%, 3.29% and 3.5% respectively. All took longer-than-expected to sell out.
  • In response to the growing concern, the central bank in Apr 20 set up a THB400bn Corporate Bond Stabilization Fund to buy up some bonds to increase market liquidity. However, this has done little for non-investment-grade issuers, whose bonds cannot be bought up by the fund.
  • According to the Thai Bond Market Association, THB443bn in corporate bonds will mature in 2H20, of which THB408bn are classified as investment grade.
  • Analysts fear that the Thai corporate bond market is likely to experience a tighter liquidity crunch in 2H20 when demand for corporate bonds ebbs and supply will be abundant. “[The] key reason is that many investors kept their money, waiting to buy the well-secured THB1tr government bond which is expected to be issued [in 2H20],” said an analyst at Asia Plus Securities.

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