Business operators' financial costs are expected to remain constant based on anticipation that the Bank of Thailand will pause rate hikes throughout the year after December's 25-basis-point increase, says a Kasikornbank (KBank) executive.
This view is based on the assumption that the US Federal Reserve will raise its policy rate one time this year, providing room for its Thai counterpart's steady monetary policy, said Thiti Tantikulanun, senior executive vice-president.
Before the Fed's latest meeting in January, when the US central bank signalled a slowdown of its future tightening path, the market had predicted that the Fed would raise the rate several times and thus pressure the Bank of Thailand to further tighten.
Mr Thiti said the scenario changed after the Fed hinted at slowing its rate-hike path.
Moreover, excessive liquidity in the local market prevents funding costs from increasing, he said, adding that demand in new corporate bond issuance remains strong this year, given the improving private investment and bonds that are due for redemption soon.
New corporate bonds are estimated to rise by 3.5% from last year to 870 billion baht, while long-term corporate bond redemption amounts to 500 billion this year, Mr Thiti said.
"New corporate bond issuance is expected to set another record high this year," he said.
KBank, the country's second-largest lender by assets, aims to keep its leadership in new bond underwriting with a market share of 20%. The bank last year captured a 22.5% share by underwriting new corporate bond issuance worth 173 billion baht.
Regarding Thailand's implementation of International Financial Reporting Standard (IFRS) 9 and 16 in 2020, KBank plans to educate customers and related parties in preparation for the new international standards.
IFRS 9 requires derivatives to be marked to market, which leads to profit and loss fluctuation, while IFRS 16 will change recognition of operating leases to recognise finance lease liability on the balance sheet.
Mr Thiti predicted that the baht would average 31.50 to the dollar in the first quarter, mainly due to foreign fund inflows driven by the tourism sector.
