Thailand's bond market has been growing at 15% per year but the market is still dominated by large institutional investors.
Steps are being taken to attract smaller retail investors.
With more market participants market depth and liquidity should also increase.
This should increase market depth, add liquidity and strengthen the market helping it gain the critical mass needed to even more attract investors (Read article about attracting more participants to Thailand's future exchange).
Click button to listen to Retail Investors for Bonds and rightclick to download
Individuals need more encouragement to buy bonds by Darana Chudasri
Authorities should review the conditions for investing in government bonds, and possibly set a maximum value per year for each investor, in order to create more room for retail investors, says the Capital Market Research Institute.
Over the past 10 years, the bond market has been growing by 15% a year on average. However, it is still being used by a limited group as government, state agency and state enterprise bonds accounted for as much as 77% of the total value of issues in 2009," said Suwisa Phaolaungthong, deputy head of the institute.
The market is also dominated by institutional investors, In fact, investment in bonds by individuals declined to 15.7% of the total in 2009 down from 19.5% in 2003.
Ms Suwisa said the government and its various agencies and enterprises were continuously issuing bonds but few of the issues were offered to individuals.
According to the SET-supervised institute, the minimum investment in bonds is still too high for retail investors. Also the primary market for government bonds tends to consider banks' clients as the priority.
If the government wants to expand the base of bondholders, the conditions should be adjusted," said Ms Suwisa.
Niwat Kanjanaphoomin, president of the Thai Bond Market Association, said one reason few individuals invested in bonds was that they perceived the returns, while better than bank interest, to be low.
However, he pointed out that in the first nine months of this year, the association's data showed the market was offering returns as high as 8.81% on an annualised basis, with the 10-year government bond offering 17.4%.
The government should design the bond features to be suitable for Thai investors' demand. In doing so, the client base can be expanded," said Mr Niwat.
Tax incentives for investors similar to those for long-term equity or retirement mutual funds (LTFs and RMFs) could also attract more retail investors, he added.
(Source: Bangkok Post, business section, Individuals need more encouragement to buy bonds, 14/10/2010, Darana Chudasri, link)
bond - a formal contract to repay borrowed money with interest at fixed intervals, a paper certificate is issued much like a stock certificate (See Wikipedia) พันธบัตร
market depth - a market with many buyers and sellers which is therefore easy to buy or sell in (liquid), only very large buy-sell transactions can move prices (See Wikipedia)
liquidity - market liquidity, how easy an asset can be sold and converted into cash (liquidated) (See Wikipedia on Market Liquidity and The Economist Glossary) สภาพคล่อง
critical mass - the minimum or smallest amount needed to get something to start working (people, resources, chemicals)
encouragement - words or actions that give someone energy, confidence or hope คำให้กำลังใจ
review - looking closely at some situation or policy to determine whether it is acceptable or not บทวิจารณ์, ตรวจสอบ, การทบทวน, ทบทวน
conditions - the situation in which something exists or some event happens สภาวะ
maximum - the most possible ที่สูงสุด ที่มากที่สุด
investor - a person or organisation that puts money into a company in exchange for a future profit นักลงทุน
retail - to sell directly to the public for their own use ขายปลีก
retail investors - small investors who are individuals or families (not large companies)
state - government รัฐ
state agency - an organization within the government, a unit or part of the government
enterprise - an organization, especially a business กิจการ, บริษัท,อุตสาหกิจ,วิสาหกิจ
state enterprise - a company owned and run by the government
issues - subjects that need to be considered ประเด็น
deputy - the person whose rank is immediately below that of the leader of an organisation รอง
dominated - controlled ถูกควบคุม ถูกชักใย บงการ
institutional investors - large companies that make very large investments as part of their business (examples: banks, insurance companies, investment funds, hedge funds, etc) (See Wikipedia)
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
individuals - persons บุคคล
enterprises - companies
issuing - officially giving something to people ออกคำสั่ง
supervised - managed, overseen, watched over and controlled to ensure that things are done correctly อยู่ในการควบคุมดูแล
institute - an organization that does research or educational work สถาบัน
SET-supervised institute - the Stock Exchange of Thailand (SET) manages the institute
primary - first and most important
clients - (formal) customer ลูกค้า
priority - something important that must be done first or needs more attention than anything else การให้ลำดับความสำคัญ
expand - to become larger ขายตัวออกไป
base - a foundation, a starting place for building more (example: their membership base is growing every year)
bondholders - investors who own bonds
Thai Bond Market Association (ThaiBMA) - "in 1994 started as the Bond Dealers Club (BDC) under the Association of Securities Companies, played roles as the first and only organized secondary market for bonds, introduced an electronic bond trading system called 'Bondnet' for the first time in the history of the Thai bond market" (See website)
reason - an explanation of an event, why an event happened เหตุ ; เหตุผล ; สาเหตุ
perceive - to notice something, to arrive at an understanding of something, to come to understand something รับรู้, สัมผัสรู้, เข้าใจ
returns - the money that an investor gets from their investment
interest - payments made for the use of another's money for a period of time
point out - to show แสดง
data - facts or information used for making calculations or decisions ข้อมูล
on an annualised basis - calculated for a period of a year, but using statistics for a shorter period such as a quarter or half year
suitable - right for a situation เหมาะสม
demand - the need and desire to buy goods and services by households and businesses
client - a customer or someone who receives services ลูกค้า
incentives - rewards for behaving in a certain way สิ่งกระตุ้น
equity - money for a business that comes from owners, not borrowed money (debt) เงินลงทุน ที่มาจากการระดมหุ้นของหุ้นส่วน และผู้มีกรรมสิทธิ
retirement - the time when you stop working, especially because of old age เกษียณอายุ
mutual funds - a professionally managed investment funds that collects together money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities (See Wikipedia)
attract - to cause someone to be interested in something ดึงดูดความสนใจ