Govt urged to set up corporate bond guarantee fund to rescue tourism industry

[webfact]

Govt urged to set up corporate bond guarantee fund to rescue tourism industry

By The Nation

 

 

Thailand needs to set up a corporate bond guarantee fund in order to rescue tourism-related industries that have been hit hard by the Covid-19 pandemic, Tada Phutthitada, president of the Thai Bond Market Association (Thai BMA), said on Thursday.

 

The fund may be set up by the government with a fund size of Bt50 billion, which would enable it to guarantee corporate bonds up to Bt125 billion, or 2.5 times, he said.

 

Tourism-related industries, such as hotels, could raise funds by issuing bonds with three-year maturity and the guarantee fund will compensate investors when issuers default on payment.

 

Three years maturity would be enough as  tourism is likely to recover from the coronavirus outbreak, he said.

 

The bond guarantee fund will be similar to Malaysia’s Danajamin, a financial guarantee for bonds and Sukuk issuance. Malaysia has been successful in implementing the bond guarantee fund, supporting businesses to raise funds via issue of bonds and create investor confidence, said Ariya Tiranaprakij, senior executive vice president of Thai BMA.

 

The Thai government may make use of the Bt400-billion Covid-19 recovery fund, which has been little utilised, she said. Or money could be drawn from the central bank’s Corporate Bond Stabilisation Fund,  which has not been utilised much since its launch in April, she said.

 

Thailand currently has the Thai Credit Guarantee Corporation, but it provides only bank loan guarantee.

 

In the first nine months this year, companies issued bonds worth Bt540 billion. They are expected to raise funds via bonds for the rest of the year, said Tada, and forecast total corporate bonds worth Bt800 billion for this year.

 

Outstanding bonds in the first nine months rose 5.09 per cent to Bt14.2 trillion from the end of last year. The issuance of government bonds contributed to the rise of outstanding bonds, but outstanding corporate bonds dropped.

 

Banks decreased their short-term debenture issuance, while energy firms increased their long-term bond issuance.

 

Between January and September, foreign investors sold government bonds worth of Bt71.3 billion, comprising  Bt64.1 billion short-term bonds and Bt7.3 billion long-term.

 

Thai bond holdings of foreign investors dropped from Bt916.8 billion to Bt848.8 billion, representing 6 per cent of total outstanding bonds.

 

Foreign investors are waiting to see the outcome of the US presidential election. They want to see how US election will affect the Thai economy. Thai government bonds remain attractive due to the lower inflation rate relative to those of neighbouring countries, but market uncertainty remains, Tada added.

 

Source: https://www.nationthailand.com/business/30395869

 

-- © Copyright The Nation Thailand 2020-10-09

 

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[Enzian]

I don't fully understand all the details of this article, but the basic idea is that one buys corporate bonds from say a hospitality company and if the  company defaults one can recover from a government fund. So: what would be involved in getting the government to pay in case of default? And what kind of returns would we be talking about? This would seem to be "junk" with a capital J.

[Isaan sailor]

The way to save tourism is the same way to save exports:  get the Baht down. Nothing else could do so much to help the economy recover.

[johng]

4 minutes ago, Isaan sailor said:

The way to save tourism is the same way to save exports:  get the Baht down. Nothing else could do so much to help the economy recover.

Well they might have to re-open the country's borders first.

[HappyinNE]

11 minutes ago, Isaan sailor said:

The way to save tourism is the same way to save exports:  get the Baht down. Nothing else could do so much to help the economy recover.

Get your home country to quit printing money and tanking their currency.  Remember currency rates are like a teter-totter.

[Cake Monster]

7 hours ago, webfact said:

Thailand currently has the Thai Credit Guarantee Corporation, but it provides only bank loan guarantee.

A only has funds for 129 Billion Baht against possible defaults of over ONE TRILLION.

[Albert Zweistein]

19 hours ago, Enzian said:

I don't fully understand all the details of this article, but the basic idea is that one buys corporate bonds from say a hospitality company and if the  company defaults one can recover from a government fund. So: what would be involved in getting the government to pay in case of default? And what kind of returns would we be talking about? This would seem to be "junk" with a capital J.

Who is stupid enough to buy Thai bonds ?

[Brunolem]

23 minutes ago, Albert Zweistein said:

Who is stupid enough to buy Thai bonds ?

When was the last time the country defaulted?

[heina]

Pertly hands going to straight to taxpayers pockets.

 

Bank of Thailand announce that without constant money injection bond market is "dysfunctional" . 

https://www.bot.or.th/English/PressandSpeeches/Press/2020/Pages/n2063.aspx

 

Ponzi in a simple words.

Edited October 10, 2020 by heina