Thailand launches retail bond exhange

Landmark event in Thai bond market passes by with a whimper.

The Thai stock exchange has launched a new trading platform for corporate bonds. The Bond Market Exchange (BMX), which opened for business Wednesday, is a secondary bond market that will make trading easier and more transparent for retail investors.

The market started trading with Bt141 billion of bonds ($3.53 billion) from some of Thailand's leading companies: Siam Cement, Advanced Info Service (AIS), Thai Airways, National Finance, Shin Corp and Krungthai Card. The bonds are rated from AA- to A- and have maturities from three to five years.

Before the launch of BMX, only 53 of Thailand's 415 listed companies had raised funds through the bond markets, where total outstanding issuance amounts to just Bt542 billion. BMX's electronic trading and reporting systems and efficient clearing and settlement will open the bond market to retail investors.

But breaking the dominance of the stock market will be difficult. Equity market capitalization is Bt3.8 trillion and 80% of daily turnover originates from retail investors. No wonder. The market is up 75% this year and some of Thailand's biggest companies have recently listed or undertaken large offerings, including Thai Airways, 7-Eleven, Krung Thai Bank and Siam City Bank.

Thai investors understand the stock market, warts and all. But bonds were previously the preserve of institutional investors, who traded paper over the counter through the Thai Bond Dealing Centre and negotiated prices in private. Consequently there was little transparency in pricing and no scope for retail investors to get involved except through mutual funds. Even among institutional investors most of the activity is concentrated on government rather than corporate paper.

So the exchange will need a strong educational push if it is seduce local investors into diverting their funds away from the stock exchange. There is no evidence that this has started to happen. The first day of trading on the BMX was a subdued affair, unambitious and little reported. The volume of trades totaled Bt31 million, with Siam Cement's eight bonds attracting almost all of the attention despite some late interest in AIS. Next door, the stock exchange turned over Bt21.5 billion on the same day.

Comparisons aren't fair, says the stock exchange. "The bond market in Thailand is still in its early stages," notes Vijit Supinit, chairman of the Stock Exchange of Thailand, which owns and operates the new board. "It still has a lot of room to grow."

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