Market sentiment for corporate bond investment is expected to recover in the third quarter, with lockdown measures likely to ease further as new coronavirus cases in Thailand peter out, says an executive.
A lack of liquidity in the bond market was stoked by fears of an unpredictable outcome for the pandemic, resulting in a series of sell-offs in investors' bond holdings.
Thailand's mutual fund industry saw a 15.3% drop in total assets in the first quarter from year-end 2019, with most of the outflows deriving from fixed-income funds, according to Morningstar Thailand.
Two fixed-income funds of TMBAM Eastspring sparked a major redemption in Thailand's mutual fund industry, to the point where the selling spree nearly caused a liquidity crunch.
But a bond-stabilising fund set up by the Bank of Thailand is expected to lend support to market stability and boost liquidity to debenture issuers, said Vasin Vanichvoranun, executive chairman of Kasikorn Asset Management (KAsset).
Debentures with good investment grades are anticipated to recover in the third quarter as a result of greater stability, Mr Vasin said.
The central bank has set up a 400-billion-baht Corporate Bond Stabilisation Fund to provide bridge financing to high-quality firms with bonds maturing during 2020-21.
Tada Phutthitada, president of the Thai Bond Market Association (TBMA), said the total outstanding value of the domestic bond market was 3.4 trillion baht in March. Of the total, 50% of total bonds were issued by listed firms in the SET100 index, 15% by other SET-listed firms and the rest by non-listed firms.
Some 76% of total bonds outstanding have AAA-A ratings, according to the TBMA. Roughly 20% of total bonds are invested in by individuals, mostly in high-yield corporate bonds.
Rollover risk remains the key concern, Mr Tada said. Of the total rollover value of 33.9 billion baht between May and December, 16 billion baht is tied to unsecured corporate bonds, he said.
Financial regulators have advised debenture issuers to reduce the rollover size and seek financial support through bank loans to safeguard against default risk, Mr Tada said.