How to get the financial sector back on its feet? This should help:
Bright prospects for Thai debt market amid gloom
By James Mclean
BANGKOK, Oct 30 (Reuters) - Crisis-hit Thailand's bond market is set to flourish sooner than expected because the government is creating right conditions for its revival, senior investment bankers said on Friday.
"We believe the bond market will come alive very much more quickly than people would expect," Michael Unsworth, chief executive officer of Merrill Lynch Phatra Securities told a conference.
"The government bond market is already very much there. We see heavy chasing of yield as well as credit quality by fixed income investors," he said.
"The government is creating a large and very liquid domestic bond market and is creating a yield curve piece by piece, I think that will be a success and the corporate bond market will develop underneath that."
"We will have in Thailand a bond market which has real depth, breadth and liquidity," Unsworth said.
Thailand's secondary bond market is supervised by the Bond Dealers Club of Thailand. Low inflation prospects, declining interest rates, and restricted lending by banks all looked likely to further develop a market which was until recently derailed by Thailand worst economic crisis in decades.
The executives said a recent series of government domestic bond issues aimed at raising billions of baht in funds for the Bank of Thailand's Financial Institutions Development Fund was creating a liquid and functional market and the yield curve which boded well for future development.
As of September 30 the market had 616 billion baht ($16.7 billion) of outstanding issues.
"You can see that over the past three months the government successfully raised about 200 billion baht in bond issuance even as yields declined from about 15 percent to 7 percent and this is an opportunity for the corporates as well," said James Mitchell, head of country research at Salomon Smith Barney.
David Fernandez, chief economist at JP Morgan in Singapore, said progress towards reforms by the Thai government should lead to a bond market of greater breadth and depth.
"Government debt issues can play a pioneering role in expanding and deepening Thailand's debt markets and it is through the persistent actions of the government that it has positioned itself to do just that," he said.
Unsworth said he expected the appetite for risk to increase over time, although the introduction of adequate foreclosure and bankruptcy laws as pledged by the Thai government to its sponsor, the International Monetary Fund, were vital for the market's fuller development.
"As the economy recovers the number of good credit risks will recover as well so more companies will go to access the bond markets," he said.
"I think as the bond market reopens we will go beyond plain vanilla bonds and see a lot more securitised instruments," he said.
"We expect the secondary mortgage corporation will probably launch the first mortgage backed security sometime in the next three to six months and that will be a very attractive instrument not only for institutional savers but also for retail investors in Thailand," he said.
15:41 10-30-98 |
