The private sector is expected to raise more than 500 billion baht through bond sales in 2014, as investors' appetite for corporate bonds remains strong due to higher returns than for government bonds and bank deposits, TBMA president Tada Phuttitada told the Bangkok Post in an exclusive interview.
In the first five months, 270 billion baht in new corporate bonds were registered with the TBMA, up from 210 billion in the same period last year.
Corporate bond issues hit a record high in 2012, when 509 billion baht was raised. Some 420 billion baht was offered last year.
The outstanding value of the overall bond market is now 9 trillion baht — 3 trillion in government bonds, 3 trillion in Bank of Thailand bonds, 2 trillion in corporate bonds and 1 trillion in state enterprise bonds.
"The TBMA's outstanding bond value has grown rapidly since the 1997 crisis, from about 300 billion baht to 9 trillion now, but the corporate bond amount remains low compared with bank loans and the bourse's market capitalisation," said Mr Tada.
He said since the financial meltdown of 1997, stock market capitalisation had doubled to 13 trillion baht, roughly the same amount as outstanding bank loans.
Corporate bonds account for nearly 17% of GDP, well below the proportion of other regional markets such as Hong Kong (31%) and South Korea (50%).
"Thailand's three-pronged funding source — bank loans, stocks and bonds — has been out of balance for a while. If it becomes more balanced, that will strengthen our capital market," Mr Tada said.
He said the Thai government and private sector had learned lessons from the 1997 crisis and now had less exposure to foreign-denominated debt.
However, more effort must be made to redress the balance between bond issues, bank loans and stock market capitalisation in order to bolster the economy's immune system, Mr Tada said.
The TBMA must lay out a strategic plan for the market’s long-term development, then forward it to its board of directors in the third quarter.
TBMA data show 70% of outstanding corporate bonds from 2003-13 were issued within five sectors — banks (19%), energy (18%), finance (13%), construction and materials (12%), property (11%) and others (27%).
To date, 111 Stock Exchange of Thailand-listed companies and one from the Market for Alternative Investment have used the debt market as a source of funds.
"They use the bond market to diversify their funding sources without having to borrow from a bank," he said.