Foreign investors back to buying Thai bonds

Foreign investors had bought nearly $1.7 billion worth of Thai bonds by early June. The figure is a strong indicator of confidence in Thailand’s economy and its corporations going forward from the pandemic.

Officials and analysts said that turnaround was attributable to attractive returns and low inflation supporting the stability of Thailand’s currency, the baht.

Ariya Tiranaprakit, Executive Vice-President of the Thai Bond Market Association, said that net buying from overseas comprised about $1.6 billion worth of long-term bonds with a maturity of more than one year, which offset net selling of short-term bonds.

“This is a good signal as the average duration of bonds held by foreigners picked up slightly to 9.57 years from 9.47 years,” Ariya said.

Kobsidthi Silapachai, Head of Capital Markets at Kasikornbank (KBank), said that “Thai bonds will become more attractive to foreign investors if the baht strengthens.”

The baht has been one of the stronger performers among regional currencies during the past few years, rising significantly against the dollar. While that may please bond buyers, it has been a problem for exporters. A stronger baht makes their products more expensive and less competitive in foreign markets.

Win Phromphaet, Executive Vice-President at Bank of Ayudhya, said that Krungsri Research forecasted the baht to reach 30.5 per dollar by the end of this year. It is currently trading at about 31.2 to the dollar.

Local institutional investors, such as Social Security Office, are also expected to invest more in the bond market, once the economy recovers.

“The situation has improved. There are no corporate bond defaults this year and the credit spread of 1.5 percent on top of three-year government bonds is about two times larger than before the pandemic, reflecting higher yields with lower risks,” Win said.