Foreign net outflows from Thai government bonds were worth 42.3 billion baht in the first quarter as investors sold short-term bonds to lock in profit and avoid impacts anticipated from higher interest rates and possible baht depreciation.
Foreign investors continued selling short-term government bonds from the beginning of this year until the end of March, said the Thai Bond Market Association (TBMA).
Foreign outflows from short-term bonds were registered at 25.7 billion baht in January, 11.5 billion in February and 23.3 billion in March, totalling 60.5 billion in the first quarter.
On the other hand, foreign inflows of long-term debt securities, defined as having maturity periods of longer than a year, were valued at 18.2 billion baht. This resulted in foreign net outflows worth 42.3 billion baht between January and March.
"It is quite strange that foreign investors reported net outflow, as the average holding period until maturity grew to 8.46 years from 7.88 years at the end of 2018," TBMA president Tada Phutthitada said.
At the end of March, the outstanding value of foreign investors' holdings of Thai bonds declined to 943 billion baht, down from 989 billion at the end of 2018, with foreign holding of long-term bonds increasing to 89% from 85%.
Mr Tada said the Bank of Thailand's policy interest rate is expected to remain unchanged until this year-end because inflation remains low and private investment, considered one of the main GDP growth drivers, has been stagnant for several years.
"Private companies will make decisions to invest when the new government is unveiled along with policies that could yield expected results," he said.
The private investment ratio has been lower than the country's average savings for many years, keeping Thailand's economic growth momentum slack. The investment-savings gap will be wider going forward with a greying demographic and lagging private investment, said Mr Tada.
For corporate bonds, debentures continue to be a popular fundraising instrument for private companies, said TBMA.
Outstanding corporate bond value was registered at 3.68 trillion baht in the first quarter, up 1.34% from the end of last year, driven by long-term debenture issuance.
New debentures issued during the January-March period stood at 280 billion baht, up 24% year-on-year, driven mainly by the real sector.
"We are amazed at this record as it could break our target of new corporate bond issuance, estimated at around 800 billion baht," said Mr Tada.
Asia Plus Securities vice-president Terdsak Taweethiratham said the 15% withholding tax on gains from fixed income funds will cause investors to shift from fixed income securities to other funds such as property funds, REITs or equity funds with high dividends.