The Thai bond market remains resilient with ample liquidity to serve new issuances this year, including government bonds issued under a special bill to fund the 500-billion-baht digital wallet scheme, says Maybank Securities.
Recent news reports of bond restructuring are likely isolated cases and "we do not see any systemic risk", according to a research note from a unit of the Kuala Lumpur-based banking group.
The brokerage said there is excess liquidity of 2.2 trillion baht in the Thai bond market, as measured by Bank of Thailand bonds outstanding. That means there is ample liquidity in the system to absorb any bond issuances and rollovers in 2024 and beyond, said Maybank.
Meanwhile, a relatively low bank loan-to-deposit ratio of 91%, down from 98% pre-pandemic, indicates that corporations can potentially access additional bank funding instead of tapping the bond market.
"The bond market continues to function well with highly-rated issuers dominating the market," Maybank noted.
The vast majority of Thailand's 4.4-trillion-baht corporate bond market are highly-rated issuers with A- and higher ratings, comprising 83% of the total market, said the brokerage.
Another 10% are in the BBB- to BBB+ categories, while the high-yield segment rated BB+ or below, as well as non-rated issues, make up 6.5% of the market.
This year, around 890 billion baht worth of bonds will come due, followed by another 821 billion in 2025, equivalent to 20% and 19% of bonds outstanding, respectively. Based on past data, the size of the Thai bond market is sufficient for bond rollovers or new issuances to replace matured ones, said the brokerage.
"We think this amount can be readily absorbed by new issuances, which have exceeded 1 trillion baht every year since 2019, except for 2020 attributed to Covid-19. Concentration risk is also limited, in our view, as the top 20 corporate issuers make up 50% of the total market," Maybank said.
The brokerage forecasts total bond issuances by both the government and corporate sector to increase by 28% in 2024 to 1.79 trillion baht, including issuances to fund the digital wallet scheme.
Corporate bond issuances are projected to decline by 11%, while government borrowing to fund the budget deficit will remain largely flat year-on-year.
Despite the year-on-year increase to 1.79 trillion baht, total bond issuance in 2024 will remain well below 2021-22 levels of 2.2 and 2.8 trillion baht, respectively.
Roughly 1.7 trillion baht was issued in both 2019 and 2020, according to Maybank.