Thailand’s Bond Market Size Targeted To Equal Its GDP In A Decade

Today (September 29) participating organizations in Thailand’s bond market, including the Bank of Thailand, Ministry of Finance, Public Debt Management Office, Securities and Exchange Commission, Thai Bond Dealing Centre and the Bond Electronic Exchange (BEX) jointly celebrated the country’s 100th anniversary of its bond market’s development. On this special day, the Bond Market Development Commission reported on the progress of its scheme. There was also a seminar entitled “Towards the 2nd Century of the Thai Bond Market” held at the SET Building.

The Thai bond market’s development started when Thailand first issued bonds in Europe during the reign of King Rama V. In the aftermath of the economic crisis in 1997, the Thai government needed a lot of funding to stimulate the economy and revitalize the financial sector. Consequently, the crisis was turned into a great opportunity to seriously develop the Thai bond market to become one of the three main pillars of the Thai financial sector, with the other two pillars being the credit and equity markets. To achieve this goal, today’s participating organizations have targeted that the market’s size will be expanded to reach Thailand’s gross domestic product (GDP) within 10 years.

Mr. Santi Kiranand, Ph.D., CEO of the SET’s BEX, elaborated more about the development of Thai bond market: “The government has already formulated measures for the bond market. In the primary market, each year the MOF plans to issue bonds with 7 and 10 years maturity, worth at least THB40.00 bln. (approx. USD 975.61 mln.) per issue. State-owned enterprises will also issue more bonds, in various structures, to fund mega-projects. To stimulate the private sector, rules easing bond issuances, both in terms of size and number, will be released. These new bonds will provide investors with more choices for their savings.

“A promotional scheme will improve liquidity in the secondary market, targeting foreign, especially regional, investors who have comparatively higher savings. On the infrastructure side, the trading system, related laws and a tax structure have all been developed to facilitate fundraising and investment,” he continued.

In 2004, the Thai bond market was equivalent to about 41% of Thailand’s GDP, while the equity market and financial institutions were equal to 68% and 77% of GDP, respectively. As of September 28, 2005, there were 73 listed bond issues, totaling THB671.33 bln. (approx. USD16.37 bln.) For comparison, the US’ bond market, equity market and financial institutions are equivalent to 149%, 122%, and 144% of the USA’s GDP respectively.

“All parties will cooperate to develop the primary and secondary markets, as well as the infrastructure for bonds, so that the targets of the Thai Bond Market Development Plan Phase II (2005 – 2008) can be achieved,” Dr. Santi concluded.