Thailand’s central bank aims to increase holdings of Chinese bonds and add overseas corporate debt to its $179 billion of foreign-exchange reserves as it seeks to boost returns.
“We fully invested the quota from the Chinese authorities and we feel that we need more diversification in our international reserves,” Bank of Thailand Deputy Governor Pongpen Ruengvirayudh said today in an interview in Bangkok. “Yuan yields are higher than in developed markets. This year will be the year we are investing more in new emerging-market assets.”
The Bank of Thailand currently has a 7 billion yuan ($1.1 billion) allocation for bond purchases and has $300 million of quota to buy onshore yuan debt under China’s Qualified Foreign Institutional Investor program, known as QFII. The monetary authority’s holdings of yuan-denominated debt is “very close” to the QFII limit, Pongpen said.
As record-low interest rates depress yields in developed countries, emerging-market bonds are attracting increasing inflows. China’s 10-year sovereign notes yield 3.57 percent, compared with 1.93 percent for the similar-maturity U.S. Treasuries and 1.46 percent for German securities, according to data compiled by Bloomberg.
The central bank wants to support internationalization of the yuan and help the development of the Chinese market, Pongpen said, adding that it’s possible the bank will apply for an expansion of its QFII quota in the future.
Thailand’s foreign-exchange reserves stood at $179 billion in the week ended Feb. 22, near a record high of $183.6 billion in September, official data show. Funds invested in yuan assets aren’t classified as international reserves because the Chinese currency isn’t fully convertible.
The Bank of Thailand will also buy more assets from non-Asian emerging markets including Eastern Europe and Latin America, she said, adding that this would help diversify risk and reduce returns volatility.