Bangkok, November 15, 2004—Thailand’s
bond market is poised to enter a stronger phase backed by new funding for
the Thai Bond Dealing Centre, according to experts from the International
Finance Corporation and National Association of Securities Dealers. In
recent years, Thailand has been striving to build a bond exchange tailored
to its needs while drawing on international best practices, IFC and NASD
experts said on a panel highlighting global trends in organized bond marketplaces.
They spoke at the Financial Engineering for Alternative Funding and
Investment conference, sponsored by the Thai Bond Dealing Center and
IFC on the occasion of The Thai BDC's tenth anniversary.
IFC has been helping Thai BDC transform into an organized marketplace for
trading bonds since early 2002. The technical assistance received the financial
support of Japan and IFC trust funds. Thai BDC began as an industry association
with limited reporting operations. It has sought to take on regulatory,
surveillance and price dissemination responsibilities as part of the government’s
efforts to build the local bond markets. IFC’s work with the Thai BDC
has focused on rules and regulations, trading operations, market surveillance,
and self-regulatory capabilities. NASD is a key part of the IFC team, bringing
additional global expertise and experience to the table.
“The Thai Bond Dealing Centre is creating a more transparent, efficient
and effectively regulated market. That will attract more investors, reduce
funding costs for public and private issuers, and provide more informative
interest rate benchmarks and yield curves,” said IFC Principal Securities
Market Specialist Allison Harwood, who is leading IFC’s activities. It
also sets a credible and quality foundation for continued growth of Thailand’s
corporate bond market. The Thai bond market has matured considerably
since the Asia crisis. Outstanding government securities grew from
36 billion baht in 1997 to 1.6 trillion baht in mid-2004. While the
market is still relatively illiquid, daily average trading is 23 times
the 1997 value.
IFC credited the growth largely to the market foundation-building work
of Thai Bond Dealing Centre President Nattapol Chavalitcheevin and his
staff. Further substantial growth in domestic bond trading will be aided
by the recent approval of a multi-million dollar-equivalent baht grant
to the Thai BDC from the Thai government to help fund its development plans.
Khun Sommai Phasee, who until October was Deputy Permanent Secretary at
the Ministry of Finance and led Thailand’s Bond Market Development Committee,
was named chairman of the Thai BDC’s board in October.
“IFC puts a high priority on supporting Thailand’s economic growth by
contributing to the development of sound capital markets that broaden and
deepen sources of capital for private companies,” said IFC country manager
Michael Higgins. In addition to support for Thai BDC, IFC was an early
investor in Fitch Ratings, a service that improves bond issuer information.
IFC provided a partial bond guarantee to Telecom Asia, today known
as TA Orange, enabling it to set new benchmarks by issuing the largest
and longest-term Thai baht bond. IFC has advised the government on building
a local derivatives markets, which will support the bond market by offering
a hedging instrument.
The International Finance Corporation is the private sector arm of the
World Bank Group. The mission of IFC (http://www.ifc.org/)
is to promote sustainable private sector investment in emerging economies,
helping to reduce poverty and improve people’s lives. IFC finances private
sector investments in emerging economies, mobilizes capital in the international
financial markets, helps clients improve social and environmental sustainability,
and provides technical assistance and advice to governments and businesses.
From its founding in 1956 through FY04, IFC has committed more than $44
billion of its own funds and arranged $23 billion in syndications for 3,143
companies in 140 developing countries. IFC’s worldwide committed portfolio
as of FY04 was $17.9 billion for its own account and $5.5 billion held
for participants in loan syndications.
Since its founding, IFC has invested in 64 projects in Thailand, committing
$1.2 billion from its own account and $1.7 billion in syndicated loans.