Thai companies sold the least amount of baht-denominated bonds in November since January 2008, as the nation’s worst flooding in almost 70 years curbs growth and saps demand from private investors.
Sales plunged 91 percent to 2.15 billion baht ($68.7 million), according to data compiled by Bloomberg, as PTT Pcl, the nation’s biggest company, pulled a planned offering of 20 billion baht of notes because of the disaster.
“People are more worried about their homes than investing,” Ariya Tiranaprakij, executive vice president of the Thai Bond Market Association, said in a phone interview from Bangkok on Nov. 28. “People tend to try to keep cash ready for emergency use.”
Flooding has claimed more than 600 lives since July and disrupted supplies for companies from Cupertino, California-based Apple Inc. to Toyota Motor Corp. in Toyota City, Japan. Industrial output in Southeast Asia’s second-largest economy slumped by the most in more than a decade in October as the disaster shut thousands of factories and halted manufacturing.
Thai baht-denominated corporate bonds have returned 0.2 percent this month, down from 1.2 percent in October, according to Thai Bond Market Association data. Fixed-income securities issued by companies worldwide have lost 1.8 percent this month through Nov. 28, according to Bank of America Merrill Lynch’s Global Broad Market Corporate & High Yield Index.
Housing Demand Slow
Banpu Pcl and Siam Cement Pcl led offerings of 201.8 billion baht of local currency debt this year, down 18 percent from the same period last year, Bloomberg data show. Offerings of corporate bonds globally fell 0.9 percent to $2.98 trillion in the same period.
“A lot of bank branches are flooded and closed so it is not a good time to sell bonds to retail investors,” said Tiranaprakij. “Institutional investors are focusing on short-term paper as they tend to wait and see of the situation and the impact of the economy.”
Government bond trading fell 46 percent in October from the previous month when volumes were 170.2 billion baht, according to TBMA data.
The flooding has caused a slowdown in demand for housing, which is heightening the risk of lending to developers, according to Tris Rating Co., the Bangkok-based rating company.
Interest Rate Cut
Ticon Industrial Connection Pcl, a Bangkok-based developer with 5.15 billion baht of debt outstanding, was put on review for a possible rating downgrade by Tris on Oct. 14 after 30 of its factories and three warehouses were flooded.
The sites accounted for 22 percent of the A rated developer’s total rental revenue in the first half of 2011, according to Tris.
Tris also changed the outlook on Prinsiri Pcl, Pruksa Real Estate Pcl, Property Perfect Pcl and Quality Houses Pcl to “negative” on Nov. 24, according to a Tris statement.
The slowdown in demand for housing “in the aftermath of the flood crisis has heightened credit risks of developers with high leverage and large concentration in low-rise projects,” the ratings company said in the statement.
The Bank of Thailand cut interest rates for the first time in more than two years and lowered its 2011 economic growth forecast today. The central bank reduced its one-day bond repurchase rate by a quarter of a percentage point to 3.25 percent. It said gross domestic product will rise 1.8 percent in 2011, less than an earlier 2.6 percent estimate.
“Borrowing costs have gone up from the beginning of the year,” Nalin Chutchotitham, an economist at Kasikornbank Pcl, said in a phone interview from Bangkok on Nov. 28. “I think the corporate sector will wait and see if cheaper borrowing costs become possible.”