Thai corporate bond issuance falls 14% amid market challenges

The issuance of new corporate bonds in Thailand dropped 14% to 704 billion baht (US$21 billion) in the first nine months of this year, as the market faced challenging conditions for fundraising. Bond issuers are waiting for interest rates to decline, according to the Thai Bond Market Association (ThaiBMA).

Somjin Sornpaisarn, President of ThaiBMA, reported that the bond market’s total outstanding value reached 17.2 trillion baht (US$515 billion), marking a 3.9% increase from the previous year, driven by a 600 billion baht (US$18 billion) rise in government-issued debt instruments. However, the outstanding value of long-term corporate bonds decreased by 2.8% to 4.7 trillion baht (US$140 billion).

The issuance of corporate bonds fell from nearly 818 billion baht (US$24.5 billion) at the end of 2023, reflecting a significant decline.

Ariya Tiranaprakit, Executive Vice-President of ThaiBMA, explained that the drop in new corporate bond issuance was largely due to a substantial decrease in high-yield bonds, which plummeted 59% to 39.7 billion baht (US$1.2 billion) from 96.3 billion baht (US$3 billion) at the end of 2023.

Investment-grade bonds issued during the period totalled 664 billion baht (US$20 billion), an 8% decrease from 723 billion baht (US$21 billion) at the end of 2023, said Ariya.

“The reason for the lower fundraising through corporate bonds was the unfavourable market conditions, which weakened investor confidence in high-yield bonds following defaults by several issuers, especially Energy Absolute (EA).”

Corporate bonds

Interest rates began to decline overseas, prompting companies to delay issuing new bonds. Bond issuers are anticipating further rate decreases next year, which would allow them to issue bonds at lower costs or opt for bank loans instead, added Ariya.

ThaiBMA forecasts that corporate bond issuers will raise between 900 billion and 1 trillion baht (US$27 billion and US$30 billion), maintaining their fundraising targets.

From January to September, large companies continued to raise funds primarily through investment-grade bonds, with the finance and securities, real estate, and energy sectors being the most active.

The association anticipates the Bank of Thailand will reduce interest rates by 0.25 percentage points in the last quarter of 2024, Ariya mentioned.

Bond market issues, such as defaults and payment postponements, seem to be stabilising. In the case of EA, negotiations have already been conducted with bondholders, added Ariya.

“If the company continues its operations, improves performance, and repays the bond, then confidence in the bond market will return.”

ThaiBMA expects the Thai economy to recover in 2025, offering opportunities for the private sector to utilise the bond market for fundraising due to lower bond interest rates and the availability of low-cost funds, reported Bangkok Post.

The bond market’s outlook for 2025 is positive, with projections suggesting the value could exceed 1 trillion baht (US$30 billion), according to Ariya.