Tris Rating, a Thai credit rating agency, has downgraded several corporate bond issuers since the beginning of this year, attributed to weakened financial conditions as economic growth slows.
According to Suchada Pantu, senior executive vice-president of Tris Rating, the moves reflect a challenging economic environment.
Many companies received a negative outlook, mirroring Thailand's fragile economic conditions. However, Tris anticipates a potential economic rebound in the second half this year, driven by fiscal 2024 budget disbursements and government stimulus packages, she said.
Economic growth this year, primarily fuelled by the tourism sector, is expected to benefit corporate bond issuers in related industries, noted the agency, while the construction and property sectors are likely to gain from increased fiscal spending.
Ms Suchada said liquidity in both the business sector and the bond market will likely improve in the latter half of the year.
The financial health of individual companies would significantly influence their credit rating outlook, she said.
"We downgraded several companies this year, although the figures are lower than last year overall," said Ms Suchada.
"We need to monitor the economy in the second half to finalise credit ratings for the entire year."
In 2023, 25 corporate bond issuers were downgraded, twice the number of upgraded companies. The downgrades were primarily influenced by economic circumstances, and partly exacerbated by delays in fiscal budget disbursement, noted Tris.
Rising financial costs following earlier policy rate hikes and reduced investor confidence related to previous bond defaults also affected market sentiment and credit ratings last year, she said.
According to Tris data, 14 corporate bond issuers were rated with a negative outlook at the beginning of the year, compared with only four with a positive outlook, while the majority remained stable.
Ms Suchada said the bond market is a key instrument for corporations to raise fresh funds, in addition to bank loans.
Despite stricter loan approvals by banks based on heightened risk management amid economic uncertainties, local firms have not significantly shifted from the loan market to the bond market, she said.
Typically companies opt to maintain a balance and diversify between loan and bond markets to manage their financial costs, said Ms Suchada.
For the first five months this year, corporate bond issuances amounted to 400 billion baht, a decrease from 511 billion in the same period of 2023, according to the Thai Bond Market Association.