1 / 25

Strategies for Prospering Thai Primary & Secondary Government Bond Market

Strategies for Prospering Thai Primary & Secondary Government Bond Market. November 20, 2009. Dr. Santi Kiranand Group Head Market Development The Stock Exchange of Thailand santiki@set.or.th. Analysis. Supply side : financing needed by government

ann-hopkins
Download Presentation

Strategies for Prospering Thai Primary & Secondary Government Bond Market

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Strategies for Prospering Thai Primary & Secondary Government Bond Market November 20, 2009 Dr. Santi Kiranand Group Head Market Development The Stock Exchange of Thailand santiki@set.or.th

  2. Analysis • Supply side: financing needed by government • Demand side: the readiness of the market and the need in government securities.

  3. Stimulus package: to help recover the economy SP1 • Jan,13 2009 Cabinet agreed to a THB1.683 trillion stimulus package to counter the economic slowdown. • The government started spending a THB116.7 billion in March 2009, called “Stimulus Package1 (SP1)”. • IMF estimated the world economic will be contracted by 0.5% - 1.0% and late recovered. • A cabinet statement said that the stimulus package is to lure back tourists and develop holiday and destinations. The exchange rate: US$ 1 ~ THB 33.3 ~ NT$ 32.35

  4. Stimulus package: to help recover the economy SP2 • After SP1, cabinet approved the Stimulus Package 2 over the next three fiscal years (2010-2012). • The plan comprised a mix of cash handouts for low earners, tax cuts, expanded free education and subsidies for transport and utilities. • SP2 is amount THB1.56 trillion. • The government expected this 2nd package to help boost GDP by 5% and create 1.6 million jobs over three years.

  5. Water Resource/AgricultureTHB0.23 trn. Public ServiceTHB1.14 trn. CommunityTHB 0.1 trn. THB1.56 trillion Public HealthTHB 9.29 bn. Tourism THB6.64 bn. EducationTHB60.15 bn. InnovativeEconomyTHB20.13 bn. SP2 Source: www.tkk2555.com

  6. SP2 • Of THB1.566 trillion, THB676 billion (43%) is allocated for logistic projects such as mass transit, roads, aviation and railways. Irrigation investment takes nearly 15% of the budget with nearly 35,000 projects. It claims to create 350,000 jobs over three years. • Energy investment gets THB213 billion. It is worth noting that the budget allocated to the Southern area is relatively high at Bt100bn. Southern GDP accounts for 9-10% of the country. • Of the THB100 billion, THB65 billion will go to five provinces in the deep South.

  7. SP2

  8. SP2

  9. Source of Funds • Source of funds of SP2 will come from the budget (39.2%), domestic borrowing (17%), foreign borrowing (27.1%) and other income (16.6%). • The package will result in an increase in government borrowing of THB 692 billion or about 7.6% of 2008 GDP. This might cause public debt to exceed 50% of GDP.

  10. 1. Financing for Fiscal deficit & Debt restructuring Source: www.pdmo.mof.go.th

  11. 2. Financing for Special Package 1 & 2 Source: www.pdmo.mof.go.th

  12. Issuance Value of Domestic Bond Bil.THB

  13. Thailand Outstanding Value

  14. Thailand Outstanding Value

  15. Thailand Trading Value Logarithmic scale

  16. Bond Turnover Ratio

  17. Yield Curve Movement From 01/01/2009 to 18/11/2009 SP2 Borrowing Plan SP2 Schedule Announcement SP1 Schedule Announcement SP1 Borrowing Plan Source: ThaiBMA

  18. Average AAA-Credit Spread Bps. Note: Data as of last date at each Quarter Source: ThaiBMA

  19. Term Spread SP2 Borrowing Plan SP2 Schedule Announcement SP1 Borrowing Plan SP1 Schedule Announcement Source: ThaiBMA

  20. What has happened? • Change in the yield curve shape (from hump in shorter than 1-year to normal shape) • Steepened yield curve has been observed since the first announcement of the SP1. After that, the curve was upward parallel shifted.

  21. What will be in the future? • It is expected to observe the increase in policy rate by Q2/2010. • The liquidity of secondary market might not speed up rapidly like it was in 2007 and 2008. • More supply ---> positive effect • Increasing yield ---> negative effect

  22. What will be in the future? • Benchmark, yield curve will be better estimated. Private sector will benefit from the clearer benchmarks. • There will be more risk-management instrument in the market. TFEX is going to launch interest rate futures by 2010.

  23. What should be prepared? • The supporting functions in bond market must be improved, i.e. the CRA, credit enhancement mechanism. • Tactfully add more players in the bond market. Government securities might be more used as vehicle in liquidity management for private sector.

  24. What should be prepared? • If less interest rate volatility is observed, it is expected to see more issuance of long term government securities. • The market will be deeper. ILB, FRB will be issued more. • Retail investor may be able to access bond market easier.

  25. Thank you www.set.or.th

More Related