The government should continue a policy to support corporate bond issuance for companies from the Cambodia, Lao PDR, Myanmar and Vietnam (CLMV) region to tap into these countries’ high potential for economic growth, said Adisorn Singhsacha, founder and chief executive of Twin Pipe Group, a financial advisory company.

The Thai bond market could become a bond financing hub for companies from CLMV that are rapidly growing, he said.

When the first wave of the Covid outbreak erupted in 2022, funding volume in CLMV drastically plunged before slightly rebounding in 2021 to around 5 billion baht, a 50% drop from pre-pandemic levels, he said.

He said the bond issuance from CLMV would typically account for around 1% of the Thai bond market’s total outstanding value of bonds. However, in the past two years, the Thai bond market hasn’t received the support from the government to become a fundraising centre for CLMV like before despite their high economic growth and geographical advantages.

“It is a pity that we will miss this opportunity,” Mr Adisorn said.

As of Nov 30, the Thai bond market’s total outstanding value, excluding foreign currency, stood at 14.77 trillion baht of which 10.81 trillion baht represents government debt, 3.89 trillion corporate bonds and 72.5 billion baht foreign bonds.

“The government should continue supporting CLMV bond issuances and take this opportunity to become a bond fundraising hub for CLMV to generate mutual growth. Thailand would have benefited from the long-term growth of those neighbouring countries, especially from Laos that now has a medium-speed train line connecting to the Chinese market,” said Mr Adisorn.

He said although the Covid-19 pandemic will likely persist, companies have more experience to adapt to the outbreak and the economy is recovering, especially the Thai market.

He expected the value of Thai corporate bond issuance to exceed 1 trillion baht next year as companies seek funding for their business recovery and expansion.

However, many firms have been struggling during the current economic slump and received poor credit ratings, most of them below BBB-, so they are classified as high-yield bonds, although their interest rates stand at 4-7%.

There are about 140 companies interested in raising funds through bonds but the group of buyers is quite limited as they are mostly high-net-worth investors.

“The Securities and Exchange Commission should encourage mutual fund buyers or institutional investors to invest in high-yield bonds to diversify risks during the recovery,” Mr Adisorn said.

Although the regulator allows mutual funds to invest in high-yield bonds, some rules or conditions pose inconvenience for investors. If there is a waiver that allows mid-sized companies to use the bond market as another source of fundraising, the mutual funds will have a wider range of high-yield bonds.

Source: The Bangkok Post