Bangkok, Aug. 4 – SEC recommends investing in fixed income securities Study-evaluate, organize and adjust investment portfolios to diversify risks Revealing the overview of the private bond market in the first half of 2023, the outstanding value was 4.86 trillion baht, growing from the end of 2022 by 6.6 percent.
Debt Department The Securities and Exchange Commission (SEC) stated that the overall private bond market in the first half of 2023 has a steady growth trend. with an outstanding value of 4.86 trillion baht, an increase of 6.6 percent from the end of 2022, most of which are debt instruments with a credit rating or credit rating of A or higher (representing 84 percent of the outstanding value all private sector bonds)
Overview of the private bond market in the first half of 2023, the value of fundraising for both short-term and long-term debt securities totaled 1.14 trillion baht, down from the same period last year with a value of 2.09 trillion baht due to issuers. Debt has been gradually issued and offered for sale in order to limit the cost of interest rates in the past year. Most of them are long-term bonds with an average maturity of 4.33 years, a slight decrease from the previous year's average of 5.11 years.
Major debt issuers are concentrated in the finance and securities sectors. Energy and Utilities and real estate development for the purpose of debt repayment and for use in the Company's business. More than 90 percent of the offering ratio is investment-grade debt instruments. (high-yield bonds), including non-investment grade and unrated, most of the bond issuers will provide more collateral to build investor confidence.
For long-term investment-grade and high-yield instruments, the average interest rate increased from 3.46% to 3.62% and from 6.25% to 6.70%, respectively, in line with the trend of rising market interest rates.
Most of the bonds that are offered, especially those with a credit rating of A or higher, can still be offered at the set value. There will be only some companies in the high-risk group that can't be offered in full. This is because investors are more cautious about their investment due to defaults of some companies.
However, the issue has not yet affected the issuance of new bonds to replace existing bonds due (rollover), as most firms aim to raise funds above the rollover amount to some extent, including: There is a backup plan for issuing additional debentures and using other sources of funds such as working capital of the business. and loans from banks, etc.
High-yield bonds still have requests for maturity extensions of approximately 1-2 years, most of which are still the same issuers who have requested for maturity extensions. And still cannot issue new debt instruments to replace the old ones that have matured. And they are often unrated debt instruments.
Data as of the end of June 2023, there were 14 issuers (38 issuers) of bonds with outstanding value of 13,395 million baht (representing 0.28 percent of the entire system), of which 63 percent were in the real estate development business group. The maturity extension has a slight downward trend. Compared to the year 2022, which was at 14,273 million baht, because some issuers redeemed debt instruments that had asked for an extension.
In the first half of 2023, there was a downgrade in credit rating and a slight increase in credit outlook from the same period last year. Caused by risk factors specific to each company.
Since the beginning of 2023, there are 3 debenture issuers offering to institutional investors or high net worth investors with a total defaulted principal value of 12,278.29 million baht, representing 0.25 percent of private debt securities. whole system All of them are listed companies on the Stock Exchange of Thailand. In which the default of all 3 debts is a specific problem for the company. It did not affect the overall bond market condition.
Here are some basic recommendations for investing in corporate bonds:
The outstanding feature of debt instruments is that they provide consistent returns and receive higher interest rates than general deposits. Each has different characteristics and risks. Since the risk is low, which is suitable for investors who focus on stability. to high-risk, higher-return options that are only suitable for certain types of investors. Those interested in investing should study and understand the characteristics of the instruments to be invested. Including considering the risk that is suitable for the level that one can accept There are basic principles for investors to consider investing in private debt securities as follows:
(1) Investors should study instrument information such as prospectus. A summary of important information of the instrument (factsheet), credit rating information, and financial statements to know who the issuing company is. What industry are you in? Offering to any type of investor What are the characteristics of bonds? Is there a guarantee? Are they subordinated or not? What is the age and interest rate? What will the money raised be used for? What is the credit rating? Is the company stable enough to be able to pay interest and principal back or not, etc. can be studied from the SEC website https://market.sec.or.th/public/idisc/th/Product/ Filing or at the “SEC Bond Check” application https://www.sec.or.th/TH/Pages/Investors/SECBondCheck.aspx
(2) Investors must assess their ability to take risks whether they are suitable for the debt instruments they will invest in or not. which risks to consider are important, for example
– The risk of defaulting on the company's debt For debt instruments with a credit rating of BB+ or lower or without a credit rating. There is often a high risk of default on debt payments. therefore giving a high return as well to offset the increased risk And suitable for investors who want high returns and can accept high investment risks.
– Risk of liquidity in trading because some debentures in the secondary market may not have much or some have almost no liquidity in the secondary market.
– price risk In case of wanting to sell debentures before maturity May not be able to sell at the desired price.
(3) Investors should know what type of investor they are. between retail investors large investors special high net worth investors or institutional investors Because sometimes the bond offering is limited to the types of investors. especially high-risk debt instruments complicated In which such instruments are suitable for certain types of investors only. Investors can study the definition of investors from the SEC regulations or ask the bond sales service provider to help verify their qualifications.
(4) Investors should have appropriate portfolio diversification to reduce investment risks. should not invest in the same type of assets and/or securities same company and companies in the same industry in a way that is too concentrated Because if there is an event that has a negative impact on investment, such as a company issuing securities defaulting on debt payments Will affect the total investment or the majority of the investor's investment. Therefore, diversification helps to manage the risk of investments.
(5) For new investors who do not yet have knowledge in fixed income investment, may choose to invest through fixed income funds. In which the fund manager will help select instruments to invest through various investment processes and diversify investments in the portfolio. In addition, for investors who want to invest in high-risk instruments but do not yet have direct expertise in fixed income investments. may also consider investing through mutual funds that invest in high-yield bond funds as well
The SEC urges bond investors to study information and invest appropriately by diversifying their investment portfolios. and regularly follow news or risk factors In order to be able to adjust the investment portfolio to be efficient and consistent with the risk that one can accept.
In this regard, the SEC urges investors to study carefully and examine information carefully before investing in all types of investments. Even if it is a company or a business operator that the SEC supervises by giving permission/licensing/approval/registering or registering with the SEC, it is just a tool/mechanism that It will help investors get sufficient information to make investment decisions or receive services that meet legal standards or conduct of professional practitioners. and reduce the risk of being tricked into investing It is not an endorsement or guarantee. business performance or return on investment.-Thai News Agency
Source: Thai News Agency