On April 10, 2019, Mr. Thada Pruthithada, Managing Director of the Thai Bond Market Association, revealed that the overall Thai bond market in the first quarter of 2019 continued to expand, reflected by the ongoing growth of long-term private sector bond issuances, which broke the record for the highest issuance compared to the same period last year, increasing by 48.747 billion baht. This resulted in the outstanding value of private sector bonds reaching 3.68 trillion baht, as large companies such as Thai Beverage Public Company Limited, Minor International Public Company Limited, and the Charoen Pokphand Group continued to raise funds from 2018 to invest in overseas acquisitions.

          “Although the private sector fundraising in the first quarter set a new record, the Association still maintains its target for long-term private sector bond issuance in 2019 at 750,000-850,000 million baht, as we need to monitor both the Thai and global economies. If growth is strong, it may encourage the private sector to raise funds beyond the set target.”


          Meanwhile, the Thai bond market in the first quarter of 2019 continued to grow well, with a total outstanding value of 12.96 trillion baht, an increase of 1.3% from 12.79 trillion baht at the end of 2018. Most of this was due to long-term private sector bond issuances offered to institutional and large investors. However, short-term private sector bond issuances decreased, as the same businesses shifted from issuing commercial paper to borrowing through loan agreements instead. 


          In terms of foreign investment, foreign investors sold off a net total of 42.305 billion baht over three months, primarily in short-term government bonds to realize profits after the direction of Thailand's policy interest rates shifted upward and the Thai baht depreciated. However, they still net purchased long-term government bonds, with an average holding period of 8.46 years, resulting in a total net investment value of 942.993 billion baht in Thai bonds for the first quarter, accounting for 7.3% of the total value of the Thai bond market.


          Ms. Ariya Tiranaprakij, Deputy Managing Director of the Thai Bond Market Association, commented on the National Legislative Assembly's (NLA) draft law to impose a 15% tax on investments in bonds through mutual funds, stating that it could impact investments in bonds through mutual funds, as taxes would be levied immediately upon interest payments, resulting in reduced returns for investors. Mutual funds would also need to seek alternative returns, as the attractiveness of bond investments would diminish.


          According to a report from Asia Plus Securities, the law imposing a 15% tax on returns from bond investments through mutual funds has already been approved by the NLA and will take effect within 90 days. This may create negative factors for bond mutual funds but could be positive for other assets, potentially causing some funds to shift towards assets that offer better returns, such as high-dividend stocks, real estate funds, and equity mutual funds.

 

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