Download SP2

Strategies for Prospering Thai Primary &
Secondary Government Bond Market
November 20, 2009
Dr. Santi Kiranand
Group Head
Market Development
The Stock Exchange of Thailand
[email protected]
1
Analysis
 Supply side: financing needed by
government
 Demand side: the readiness of the
market and the need in government
securities.
2
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
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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.
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SP2
Water Resource
/Agriculture
THB0.23 trn.
Public Service
THB1.14 trn.
Community
THB 0.1 trn.
THB1.56 trillion
Public Health
THB 9.29 bn.
Tourism
THB6.64 bn.
Education
THB60.15 bn.
Innovative
Economy
THB20.13 bn.
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Source: www.tkk2555.com
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.
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SP2
7
SP2
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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.
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1. Financing for Fiscal deficit & Debt restructuring
Bond
1.1 Benchmark Bond
1.2 Non-Benchmark Bond
1.3 Saving Bond
1.4 P/N
Issue
Term
(Year)
Expected Fiscal
Year 10
(Mil. THB)
Fiscal Year 09
(Mil. THB)
5
72,000
74,380
140,000
10
53,000
65,000
70,000
15
24,050
26,650
40,000
20
23,950
38,000
40,000
30
5,000
5,500
20,000
10,000
-
15,000
12
8,000
16,000
15,000
14
15,000
-
-
6,000
80,000
100,000
30,950
83,598
51,171
2
-
88,000
-
3
-
49,999
-
-
134,000
-
7
5–10
>5
2.1 S-T Government Bond
Fiscal Year 08
(Mil. THB)
2.2 T-Bill
3.1 Floating Rate Bond
4
-
22,000
30,000
3.2 Inflation Linked Bond
?
-
-
10,000
260,681
683,127
10
531,171
Total
Source: www.pdmo.mof.go.th
2. Financing for Special Package 1 & 2
Issue
Term
(Year)
Bond
2.2 Bank Loan
1-10
1 Oct 2009 – 31 Dec
2009
Fiscal Year 09
SP1
(Mil. THB)
SP2
(Mil. THB)
30,000
100,000
3.1 P/N
5+
-
100,000
3.2 Saving Bond
5+
-
70,000
30,000
270,000
Total
Source: www.pdmo.mof.go.th
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Issuance Value of Domestic Bond
Bil.THB
1400
1200
Bil.THB
1000
800
600
400
200
0
2001
2002
2003
2004
2005
2006
Government Debt Securities
2007
2008
2009 as of
Q3
Corporate Bond
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Thailand Outstanding Value
5,000,000.00
4,500,000.00
4,000,000.00
Mil.THB
3,500,000.00
3,000,000.00
2,500,000.00
2,000,000.00
1,500,000.00
1,000,000.00
500,000.00
0.00
2001
2002
2003
2004
2005
Government Debt Securities
2006
2007
Corporate Bond
2008
2009 (1-10)
Foreign Bond
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Thailand Outstanding Value
Ex. Gov. Securities
1,200,000.00
1,000,000.00
Mil.THB
800,000.00
600,000.00
400,000.00
200,000.00
0.00
2001
2002
2003
2004
2005
Corporate Bond
2006
2007
2008
2009 (110)
Foreign Bond
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Thailand Trading Value
100,000,000.00 Mil.THB
10,000,000.00
Logarithmic scale
1,000,000.00
100,000.00
10,000.00
1,000.00
100.00
10.00
1.00
2001
2002
2003
2004
Government Debt Securities
2005
2006
Corporate Bond
2007
2008
2009 (1-10)
Foreign Bond
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Bond Turnover Ratio
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2001
2002
2003
2004
2005
Government Debt Securities
2006
2007
2008
2009 (1-10)
Corporate Bond
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Yield Curve Movement
From 01/01/2009 to 18/11/2009
SP1 Schedule
Announcement
Source: ThaiBMA
SP1 Borrowing
Plan
SP2 Schedule
Announcement
SP2 Borrowing
Plan
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Average AAA-Credit Spread
Bps.
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
Q3 2009
Q2 2009
<= 3 Yrs
Source: ThaiBMA
Q1 2009
3-5 Yrs
Q4 2008
> 5Yrs
Note: Data as of last date at each Quarter
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Term Spread
T e rm S p re a d 1 0 - 1 y e a r
3 .5
3
2 .5
2
SP2 Borrowing
Plan
1 .5
1
0 .5
Source: ThaiBMA
18/10/2009
18/9/2009
18/8/2009
18/7/2009
18/6/2009
18/5/2009
18/4/2009
18/3/2009
18/2/2009
18/1/2009
18/12/2008
SP1 Schedule
Announcement
18/11/2008
0
SP2 Schedule
Announcement
SP1 Borrowing
Plan
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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.
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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
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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.
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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.
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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.
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Thank you
www.set.or.th
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