Kasikornbank (KBank), the country's top bond underwriter, forecasts new corporate bond issuance to reach 850 billion baht, breaking the annual issuance record, as those with bonds due will roll over debt and prospective issuers will rush to lock in low rates after the central bank signalled that normalisation is around the corner.
Thiti: Local bond market is maturing
If new corporate bond issuance hits 850 billion baht, that will mark 7% growth from last year's 795 billion, said Thiti Tantikulanan, head of capital markets business for KBank.
His estimate is more optimistic than that of the Thai Bond Market Association (TBMA), which predicts that companies will raise 760-800 billion baht by issuing bonds this year.
For the January-May period, new corporate bond issuance totalled 435 billion baht, according to TBMA data.
Energy operators, financial institutions and property developers will be the three largest bond-issuing sectors this year, as most of their bonds carry a maturity of 2-3 years, Mr Thiti said.
Debt rollovers will contribute to the massive bond offering as many corporate bonds come due this year, he said, adding that the time is right to lock in cheap borrowing costs with interest rate hikes imminent.
KBank, the country's third-largest lender by assets, forecasts that the Bank of Thailand will start hiking the policy rate next year. The central bank has kept the benchmark rate at 1.5% since April 2015.
Mr Thiti said the changing behaviour of local firms, particularly small businesses, has boosted demand in bond issuance. Business operators are increasingly issuing bonds with the purpose of managing costs and diversifying funding sources.
Previously, only conglomerates and large companies accessed the bond market for fund mobilisation.
The local bond market's development and its sound fundamentals open greater opportunity for new bond issuers, Mr Thiti said.
Although the number of new bond issuers has not increased significantly, he noted that it will take some time for mid-sized companies to grow and build an attractive credit rating for issuing debentures.
Bonds at investment grade (BBB+ and above) are institutional investors' typical focus.
"The Thai bond market's development has continued and it is becoming more mature," Mr Thiti said. "It's an alternative source of funding for large local companies, in addition to bank loans. The bond market has been a major funding source for some companies because of greater flexibility."
He said KBank's market share in the bond underwriting market is 22% now, up from 17% last year, and the bank aims to maintain its current market share and ranking through the year's end.
Based on this year's new bond issuance target of 850 billion baht, the bank must underwrite 150 billion baht worth of bonds this year to achieve the market share target.