New corporate bond issuance has plummeted 41.9% from a year earlier for the four months through April as the coronavirus outbreak dents demand, according to an executive at Kasikornbank (KBank).
For the first four months, new corporate bond issuance amounted to 180 billion baht, compared with 310 billion over the same period a year before, said Thiti Tantikulanan, head of capital markets business at KBank.
Of the total, 31 billion baht worth of corporate bonds were sold in January, 49 billion in February, 51 billion in March and the remainder last month.
The Covid-19 pandemic and the government's containment measures have disrupted business operations on a wide scale, hobbling purchasing power and stoking investor concerns that corporate bond issuers could suffer liquidity crunches and default.
Despite the country's partial lockdown implemented since March 23, new corporate bond issuance size in April was still high because of bonds worth 25 billion baht issued by the country's cement and building material conglomerate Siam Cement Group (SCG) and 15 billion in bonds offered by PTT Global Chemical Plc.
Both bonds have been rated A+.
Mr Thiti said new corporate bonds rated A represented 70% of total corporate bond issuance last year, and the proportion increased to 76% at the beginning of this year, reflecting that high-quality bonds have not been affected by bond market volatility from the outbreak.
However, the size of new corporate bond issuance is expected to decline 20% to 900 billion baht this year from 1.08 trillion last year.
Of the total estimated 900 billion baht worth of new corporate bond issuance, 500 billion will be rolled over to refinance maturing bonds and the remaining 400 billion represents new offerings, he said.
There have been no negative signs for expected rollover bonds worth 500 billion baht, with the exception of loss-ridden Thai Airways International Plc, said Mr Thiti.
The government plans to submit a rehabilitation plan for the ailing national carrier to the Bankruptcy Court, but it should not affect the overall bond market, he said.
Interestingly, most corporate bond issuers have shifted their fundraising methods to private placement with institutional and high net worth investors from public offerings to avert any potential failure in mobilising funds among risk-averse retail investors during the pandemic, said Mr Thiti.
Retail investors are more likely to fret over the impact of the Covid-19 outbreak on business operations, he said.
Demand for bonds with investment grades from institutional and high net worth investors is strong, as they are yield-hungry with few investment alternatives and returns dip due to the pandemic, said Mr Thiti.
"Only SCG sold its debentures through a public offering to retail investors, who were still keen on the bonds as they have strong confidence in the company and it has a high credit rating," he said.
"The trend of companies with a strong reputation, which are on the radar of retail investors, issuing bonds will continue."
No companies requested use of the central bank's Corporate Bond Stabilisation Fund to subscribe to their new bonds issued for rollover, said Mr Thiti.
He said high-quality companies, including those from the property sector, can raise new funds from bond issuance, while hotel and tourism-related business operators have no plans to offer new bonds as they prefer to use their own liquidity or bank loans.
For the Mutual Fund Liquidity Facility, a special liquidity facility for fixed-income mutual funds suffering from tight liquidity in the bond market, total financial assistance peaked at 56 billion baht in April before falling to 50 billion recently, suggesting improved market liquidity.