Foreign funds snapped up 30 billion baht worth of Thai bonds, mainly long-term notes, from April 1-12, equal to their usual average monthly purchase, said Niwat Kanjanaphoomin, president of the Thai Bond Market Association (TBMA).
Mr Niwat said previously their average monthly purchase of Thai notes stood at 30-40 billion baht.
Year-to-date total net inflows were around 150 billion baht, while accumulative net inflows totalled 780 billion baht.
Meanwhile, total market capitalisation of the Thai bond market is 800 billion baht, with foreign funds making up around 10%, compared to 30% in Malaysia and 40-50% in Indonesia.
Foreign investors have also increased their investment in long-term bonds to 30% of their holdings from 10% in the past, said Mr Niwat.
Since early this year, the yield of long-term bonds _ those with 10-year to 20-year maturities _ has slightly declined by about 10-20 basis points while the yield of those less than one year has declined by 4-5 basis points.
Currently, returns on short-term bonds are 2.71% for those of less than one year, 3.17% (five-year maturities), 3.40% to 3.50% (10-year) and 3.96% (20-year).
In the wake of declining interest rates, investors are shifting investments to long-term bonds to seek higher returns.
For foreign investors, the strong baht means they get an additional 4-5% on top of the coupon rates.
But Mr Niwat said the Bank of Thailand should consider implementing soft measures first because too harsh rules might drive foreign investors away.
He suggested that regulators require foreign funds to register and declare their investment objectives so the central bank can easily track their movements.
Such disclosure will also enable regulators to apply specific rules to target groups instead of blanket ones that may disrupt the overall investment climate.
Currently, only banks' custodians know their fund customers' transactions and movements, while others have no such information, including the TBMA.
"We know only about their investments in bonds but we have no idea how much money they put into stocks or currency trading or others," said Mr Niwat.
"Personally, I think the disclosure rule, coupled with similar data from banks and custodians, should be adequate to stem the fund inflows. It should have a psychological effect on punters," said Mr Niwat.
But he warned draconian measures could backfire.
"When considering any measure, authorities should bear in mind its effect on the costs of the local firms and exporters which have already suffered from the wage hike and the baht appreciation."
Also, market liquidity should be taken into consideration in light of the government's plan to raise 2 trillion baht to finance megaprojects over the next seven years.
"Measures that do not add to operators' costs should be the priority," said Mr Niwat.
This year, TBMA targets 350 billion baht in new corporate bonds. The first-quarter target has already been reached with 84 billion worth of debentures issued during the period.
About the author
- Writer: Nuntawun Polkuamdee
Position: Business Reporter