Stock Exchange Of Thailand Provides A Secondary Market For Bonds Making It A Fundraising Hub For Both Equity And Debt Products

The Chairman of The Stock Exchange of Thailand, Mr. Vijit Supinit, said in the opening ceremony for corporate bond trading today (26 November 2003) that it is a vital step towards developing a secondary market for bonds in Thailand with electronic trading and reporting systems as well as efficient clearing and settlement systems. Equipped with these, the SET is ready to serve the fundraising needs of listed companies having the potential to issue bonds. In addition, this will also smooth the progress for investors who are interested in bonds. It will provide investors with more alternatives and make it more convenient.

"The bond market in Thailand is still in its early stages. Currently government and corporate bonds are worth 2.3 trillion baht in total or 42 percent of the country's gross domestic products (GDP). 32 percent are government bonds worth 1.76 trillion baht and 10 percent are corporate bonds worth 542 billion baht. This means the bond market still has a lot of room to grow."

"Developing an efficient secondary bond market exchange helps balance the country's economic development by facilitating the fundraising requirements of the private sector by enabling the issuing of a wider range of instruments. This, in turn, provides a variety of investment choices suitable to the investment objectives of investors as well," Mr. Vijit said.

The trading of bonds, issued by either government or private sectors, has been done through an over-the-counter (OTC) market where buyers and sellers negotiate directly. The main players are institutional investors and mutual funds. Retail investors, on the otherhand, have been investing in bonds through the mutual funds. The institutional investors mainly invest in government bonds as observed by average daily trading of government bonds this year at 10,000 million baht while that of private bonds are 680 million baht.

Mr. Vijit went on to say that currently only 53 of the 415 listed companies raise funds through issuing bonds worth 500 billion baht in total. Compared to total market capitalization of the common shares at 3.8 trillion baht, the amount is still quite small. Therefore there is still a lot of room for listed companies to raise funds through bonds. Developing the infrastructure for efficient trading and for enhancing more liquidity by the launching of a secondary bond market exchange on the SET will consequently benefit both the listed companies and any savers interested in bonds.

Six listed companies have listed their 21 debentures, worth 141 billion baht in total, ready for the first trade today. These debentures are comprised of eight debentures from the Siam Cement Plc. (SCC), another seven from the Advanced Info Service Plc. (AIS), two each from Thai Airways International Plc. (THAI) and National Finance Plc. (NFS), and one each from the Shin Corporation Plc. (SHIN) and the Krungthai Card Plc. (KTC). These debentures have credit ratings from AA- to A- and have time to maturity from 3-5 years.

For more information and trading data on bonds, investors can keep updated from newspapers, TV programs, and the SET website at www.set.or.th, as well as the trading rooms at their brokers' offices.