Thai firms raise $54bn from debt market

Reuters/BangkokThai businesses are rushing to the debt market after raising a record 1.74tn baht ($54bn) last year, encouraged by demand from investors seeking higher returns in the face of low-yielding bank deposits and a relatively volatile stock market. In January-to-March, the number of corporate debt issuers reached 158, or 70% of the total for all of last year, according to the Thai Bond Market Association. The jump reflects the recent increase in small and medium-sized firms venturing into the debt market to raise funds. By value, the companies raised 245bn baht, although that was down from 433bn baht a year earlier when issuance was inflated by a handful of big offerings from big companies including CP All and Thai Oil. Thai businesses have increasingly turned to the debt market as banks keep prime lending rates high despite cuts in the central bank’s policy rate. Sluggish economic growth has made banks cautious about lending. Land and Houses, Thailand’s biggest home builder, raised 8bn baht in the bond market in March. Charoen Pokphand Foods, the country’s largest meat and animal feed producer, plans to sell 12bn baht of debt this month. A small leasing firm, Lease IT, sold bills of exchange for the first time this year. It plans to offer 500mn baht of two-year bonds in June. “We try not to borrow from banks as it costs more. Prime loan rates are about 7%, but bills cost less than 5%. A bond issue will cost at most 5.5%,” Managing Director Sompon Aketerajit told Reuters. Sustaining the rally in the bond market are investors searching for higher yields. They are put off by bank deposits that pay interest of just 1 to 2%. Some investors also prefer bonds with steady yields to more volatile stocks. Analysts also say there are investors who have moved their savings out of deposits and into bonds, as the government is due to cut deposit insurance to 25mn baht per account from 50mn baht starting in August, and further reduce coverage to 1mn baht from August 2016.